Local regulators grapple with Solvency II implementation

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Local regulators grapple with Solvency II implementation

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Local regulators grapple with Solvency II implementation

The past month has brought further uncertainty to the insurance market with further delays to the finalisation of the Omnibus II directive.

The European Parliament’s Economic and Monetary Affairs Committee (Econ) has delayed a crucial vote on the Omnibus II directive for two months – the second time this vote has been postponed – which could lead to delays to the finalisation of the rest of the regime.

Despite the slow progress at European level, local regulators are pushing ahead with their implementation timetables, albeit at varying speeds. Some are encouraging insurers to begin reporting on a Solvency II basis in 2012, while others are increasing their monitoring of insurers’ preparation. But some regulators continue to suffer from limited resources and the impact of the eurozone sovereign debt crisis. As a result, there appears to be little homogeny across Europe.

The continued delay to the finalisation of Omnibus II has left regulators and insurers alike in a difficult position in which the regime’s detailed requirements continue to remain unclear. Even the proposed move to delay full implementation of Solvency II until January 1, 2014 has not been confirmed. Until Omnibus II is adopted, Solvency II’s implementation date is October 31, 2012.

“From a legal perspective, the Omnibus II directive is going to fix an implementation date,” says Noleen John, a corporate and insurance consultant at Norton Rose law firm in London. “The Financial Services Authority [FSA] says it expects Solvency II to be running in the background from 2013, but those dates have not been confirmed.”

Tobias Buecheler, head of Solvency II Project at Allianz in Munich, agrees that nothing is yet set in stone. “In general, due to a delay in the Omnibus II vote it is not clear if the whole Solvency II process will be further delayed. Currently the industry is requested not to assume a further delay though.”

In addition to setting the full implementation date of Solvency II, Omnibus II will also establish how the regime will come into effect and whether there will be a full postponement to January 1, 2014, or whether there will be requirements on firms during 2013.

The uncertainty leaves regulators with little guidance on what they should expect of insurers over the next two years, according to Maxime Gibault, head of insurance companies at BNP Paribas Securities Services in Paris.

 “Delays to the Omnibus II directive, which aims to provide final details and transition procedures from Solvency I to Solvency II, have been really painful for regulators,” says Gibault. “They were not able to guide insurers over final details such as model calibration.

“Additionally, as the Solvency II starting date remains January 1, 2014, the more Omnibus II is delayed the less time it gives regulators to transpose the final directive into local jurisdictions where they are expected to help,” he adds.

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