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QIS4 is part of the process of assessing the impact of Solvency II proposals on insurance groups and companies. It allows firms to assess the potential impact the latest proposals may have on the capital requirements.

Watson Wyatt believes that not undertaking early and in-depth preparation for Solvency II could prove a costly mistake for insurers, as they may otherwise not give themselves enough time to react if parts of their business generate excessive capital requirements under the standardised approach.

The Watson Wyatt survey, which looked into insurers' preparation for Solvency II, found that up to 80 per cent of UK life and non-life insurers are likely to participate in QIS4.

But of the 90 insurance professionals surveyed, only 34 per cent indicated that they would be undertaking advanced recalculation in line with the QIS4 specification, with the majority saying that their QIS4 submission would be based on simple calculations.

The research also revealed that nearly 30 per cent of UK insurers expect to spend more than fifty days on QIS4.

Mark Chaplin, global head of risk and value management services at Watson Wyatt, said that significant changes may need to be made and firms without a clear plan of what will and will not need to be done are taking unnecessary risks.

"Insurers who discover early enough that parts of their business generate excessive capital requirements under the standardised approach are giving themselves time to react.

"Delaying key preparation work runs the real risk of nasty surprises later in the process and may put companies at a competitive disadvantage to those taking earlier action."