Convergence and harmonisation is key to the success of Solvency II, according to panellists at public hearing

Harmonisation and convergence were the main themes that marked a public hearing at the European Commission (EC) on Solvency II yesterday. The panel, which included industry stakeholders, consumer groups, members of the European Commission and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS), stressed that a single and unified approach was integral to the success of Solvency II.

Though the high-level principles that will form the basis of Solvency II are still being decided, the more controversial aspects of the directive are already in active debate. Harmonisation, industry submissions to consultation papers and regulatory convergence were offered as pre-emptive solutions to the more contentious issues of home-host, the threat to small to medium-sized enterprises (SMEs) and the final calibration of the directive.

CEIOPS chair Henrik Bjerre-Nielsen stressed that such principles would be vital to meet the goals of Solvency II, saying that “One of the main purposes of Solvency II is to ensure a level playing field throughout the EU…success of implementation will be enhanced by seeking greater supervisory convergence”. Bjerre-Nielsen went on to say that Pillar I and III would benefit most by these principles. “Actual convergence will not happen by forcing supervisors to apply the same rules. Priority should be given to creating a convergent supervisory culture throughout the EU.”

Currently, Solvency II’s second Quantitative Impact Study (QIS2) is going underway, and regulators expect the results to identify whether the directive in its current state can ensure EU-wide synchronicity. The QIS results are expected to be published by October this year, but there will be more consultation papers issued by the end of this month.

Work on Solvency II has been marked by an incredibly short turnaround time for consultations for such an enormous task. As Alexander Schaub, director general of the European Commission’s internal market and services explained, “We are merging 14 directives into one codified directive. It is a massive, ambitious project.” To this end, Schaub urged interested parties to take part in hearings and further consultations. “The current framework doesn’t adequately take into account risk. Solvency II intends to overhaul and deepen EU regulation and supervision in the insurance area,” he said.

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