31 October was meant to be Solvency II day 31 October 2012 It's hard to believe, we know, but the brave new world of Solvency II was meant to be ushered in on 31 October 2012. The financial crisis, endless technical discussions and most recently political manoeuvring have taken their toll and now 2016 seems the earliest possibility for Solvency II to go live. Here we track the constant changes in the timetable
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In July 2007, the European Commission adopted the Solvency II proposal, which was updated in February 2008 with a 31 October 2012 implementation date for the directive - to ‘go live' on 1 November 2012. This has since changed to 1 January 2013; then a ‘phased-in' approach of 1 January 2013 for supervisors and 1 January 2014 for firms; and then - the latest official change - 30 June 2013 for supervisors and 1 January 2014 for firms. "If Solvency II has been implemented today I think Torus, and most companies in our peer group, would have coped," says Tim Harris, CFO of Torus and head of the property, casualty and specialty insurer's Solvency II committee. "But it wouldn't be easy, because of the massive uncertainty on regulation, which we still have."
The delays of Solvency II
November 2008 o
European Parliament plenary vote of Solvency II – delayed from 3 December 2008 to 3 February 2009.
October 2010 o
European Commission announces delay to Solvency II implementation date from 31 October 2012 to 1 January 2013.
June 2011 o
September 2011 o
o
Omnibus II ECON vote passes.
o
Omnibus II plenary vote delayed until 1 July and then later to 10 September.
April 2012 The date for supervisors to implement Solvency II into law is changed from 1 January 2013 to 30 June 2013. Deadline remains 1 January 2014 for firms to implement the directive.
July 2012 o
Omnibus II plenary vote delayed from September to 22 October.
o
European Parliament confirms the 1 January 2014 deadline for insurers in its official journal.
o
Trialogue between Parliament, Council and Commission deadlocked over longterm guarantees.
September 2012 o
Omnibus II ECON vote delayed until 21 March.
March 2012
o
Omnibus II plenary vote delayed until April 2012.
January 2012 o
Omnibus II Economic and Monetary Affairs Committee (ECON) vote delayed from 20 December 2011 to 24 January 2012.
December 2011 o
Solvency II implementation date changes to a ‘phased-in’ approach of transposition for supervisors in member states on 1 January 2013 and implementation of the directive on 1 January 2014 for firms.
Omnibus II plenary vote delayed to March 2013 after it's decided a long-term guarantee impact assessment needs to take place.
October 2012 o
Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority, says the directive will “probably be implemented in 2016”
The latest setback is to the Omnibus II plenary vote, previously scheduled (after being delayed three times this year already) for 20 November, which has been rescheduled to 11 March 2013. The main bone of contention in Brussels is the long-term guarantee package. European Parliament, Commission and Council have said they will come to a decision on the impact assessment for long-term guarantees on 9 November, when another political trialogue will take place. The two choices the parties have are between an ‘ex-ante' or an ‘ex-post' approach to when the assessment is conducted (see table).
Approach Description Date Result
Ex-ante Ex-post Assessment after Omnibus II Assessment before Omnibus II November 2012 – April 2013 October 2012 – March 2013 Omnibus II in June 2013, Solvency II Omnibus II in October 2012 (or early in 2015 November 2012) Solvency II in 2016
Last month, after the trialogue once again failed to come to an agreement, a ‘non-paper' - a nonofficial paper seen only by involved parties - was circulated on the long-term guarantee package and the timings of Solvency II laying out the two approaches. The ex-ante approach, which is "the direction in which things seem to be moving," according to David Kemp, a Green Party advisor to the Economic and Monetary Affairs Committee, would see the assessment go ahead before finalising Omnibus II - between November 2012 and April 2013. This would mean political agreement on Omnibus II would be reached in June 2013, the Solvency II directive would be published in October 2013 and full implementation would be 2015. Conducting the assessment after finalising Omnibus II - the ex-post approach - would have involved the assessment taking place between October 2012 and March 2013, with political agreement on Omnibus II also in October 2012. Solvency II would be published in January 2013 and full implementation would be set for 2016. According to Kemp, the Commission thinks that ex-ante approach "will actually save time by obviating the need or a parallel run" of the directive.
Sean McGovern, Lloyd's
The European Parliament is "generally supportive" of this approach as the best way to inform a political agreement on the level 1 text and "that ensures that the level 2 implementing measures are suitably framed - as better quality justifies any delay," Kemp, who advises Sven Giegold, Green Party MEP, told InsuranceERM. "The main discussion recently has been about the content of the impact assessment as laid out in the terms of reference and technical annex of which we still await a final iteration," he said. The "final iteration" should be out this week, according to Parliament. The date of Solvency II implementation was only officially changed to the 1 January 2014 on 12 September, when the Commission published the amending directive in its official journal. But the purpose of this was to "avoid any legal uncertainty," according to Charles Garnsworthy, leader of
PwC's Solvency II team, and almost around the same time, rumours of a year, two year or three year delay began circulating. A poll of 50 industry representatives attending a seminar on insurance regulation at Lloyd's last week revealed that more than a third believe Solvency II will be implemented after 2016. About a third of the audience expected it in 2016 and 21% in 2015. A further 10% said it would never be implemented. Sean McGovern, director, risk management for North America and general counsel at Lloyd's of London, said the numerous delays to Solvency II are "not helping the credibility of the EU policy machine and it's damaging the credibility of the EU insurance industry".
Tim Harris, Torus
"The negative statements among US executives, but also globally, is something that regulators need to address," he told attendees of the seminar. "The delay is obviously very frustrating. But there's an awful lot in Solvency II that's good." Despite all the discussions around Solvency II centering on the issue of long-term guarantees, several market sources have expressed fears that controversial issues where agreements are fragile could cause problems later down the line. "The main issues that are being discussed now - long-term guarantees and valuation rates - are of relatively less magnitude for Torus and the P&C [property & casualty] industry than for the life sector," says Harris. "However, there is a frustration from all sides that, although the long-term guarantee package is of vital importance for non-P&C consumers, the industry as a whole is having to deal with incredible uncertainty - that is the ultimate issue." "It is possible some other areas could be brought back for debate," Garnsworthy agreed. "A delay would be an opportunity for those that have been lobbying particular points to revisit them."
Charles Garnsworthy, PwC
Janine Hawes, insurance director at KPMG, highlighted particular areas that "could come back to bite us." "There hasn't been a proper form of gap analysis on temporary equivalence assessment criteria," she said at the consulting firm's technical seminar in London last week. She also said transitional measures are "very different" in the three Omnibus II proposals. "I think it will come to the fore again," she said. The elections to the European Parliament are scheduled to take place in June 2014, another element that could slow progress, Some would argue that implementing a quality directive slowly is more beneficial than pushing ahead with an incomplete directive. "Yes, it's important to get it right than implement incorrectly, but it's not been quick," says Torus' Harris. "I've had the pleasure of working on Solvency II for around seven years." "It doesn't do the industry any favours to have this regulatory cliff hanging over us," he adds. "It makes investors reluctant to invest and is ultimately damaging for consumers. The London market is entrepreneurial and adaptive, but the one thing the industry needs now is regulatory certainty."
