EU reaches breakthrough on Solvency II
The proposed January 2016 implementation date for Solvency II now appears more likely after agreement was reached by Council and Parliament on the Omnibus II Directive following a marathon negotiation session last week.
The EU's financial services chief, Michael Bernier, stated that the agreement had removed the final obstacle to putting the new capital standard into force; "in practice it makes the implementation of Solvency II possible".
The agreement has been hailed by Europe's biggest insurers as a crucial development in the implementation of Solvency II.
Proposal for directive postponing application of Solvency II
The European Commission has published a proposal for a directive postponing the application date of Solvency II to 1 January 2016.
Please click here to view the proposal and the accompanying statement in full.
Publication of Guidelines related to the preparation for Solvency II
On 27 September 2013, EIOPA published final Guidelines for the preparation of Solvency II.
The Guidelines cover a number of aspects of Solvency II, namely;
- the system of governance,
- forward looking assessment of 'own risks' (based on the ORSA principles),
- submission of information to national supervisors (ie reporting) and
- pre-application of internal models.
Central Bank publishes Solvency II Matters
The Central Bank has published the latest edition of Solvency II Matters. The newsletter provides a summary of recent Solvency II developments and sets out areas of focus over the coming months.
Principal developments include the following:
- Guidelines on preparing for Solvency II
EIOPA's consultation on the Guidelines on Preparing for Solvency II closed on 19 June. Since the publication of the newsletter, EIOPA and the Central Bank have published the final guidelines for the preparation of Solvency II.
- Industry Events
The Central Bank's industry briefing in May provided detail on EIOPA's draft guidelines on Preparing for Solvency II. The Central Bank gave an overview of its proposed implementation approach and indicated its intension to apply the Guidelines in accordance with the risk-based supervisory approach set out in PRISM.
The Central Bank will hold a further industry event in November to provide additional guidance on how the Central Bank will engage with companies during the period in which the preparatory guidelines will apply.
- Long-term guarantee impact assessment
EIOPA published its technical findings on the Long-Term Guarantee Assessment (LTGA). The purpose of the LTGA was to test the Long-Term Guarantee package, aimed at ensuring appropriate treatment of long-term guarantee products under volatile and exceptional market conditions. Five Irish (re)insurance undertakings participated in the LTGA and the results were shared with EIOPA. The Central Bank also submitted a "national report" to EIOPA following the exercise.
Recommendations include the following:
- extension of measures to cover cross-border business and reinsurance;
- removal of member state options; and
- a preference for a longer extrapolation period.
- Update on Omnibus II
Discussions on the Omnibus II Directive resumed in July and have centred on the long-term guarantee package, taking into account the results of the EIOPA LTGA. The Central Bank continues to work towards an assumed Solvency II implementation date of 1 January 2016 which now appears more likely following recent agreement at EU level on Omnibus II.
- Undertaking specific parameters
The Central Bank surveyed non-life firms on behalf of EIOPA in relation to Undertaking Specific Parameters (USPs). The aim was to gather the following information:
- intention to use USPs;
- potential lines of business;
- likely data sources; and
- states of preparedness for a future USP application.
The results will be submitted to EIOPA but are directly relevant to the Central Bank in terms of planning for formal USP applications in future.
Please click here to view the full text of the newsletter.
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