Latest Omnibus draft reveals staggered introduction of rules from 2012 to 2016
The emergence of fresh delays in the Solvency II timetable has sparked a warning that the European Commission’s 1 January 2013 deadline for implementing the directive is increasingly unrealistic.
The Council of Europe’s latest draft version of Omnibus II, which provides a framework for implementing Solvency II, says the introduction of rules governing the directive will be staggered between September 2012 and the end of 2016.
Most important, from insurers’ perspective, the rules cover the amount of capital they must set aside to guard against insolvency.
The original draft of Omnibus II set a 31 December 2011 deadline for insurance regulator Eiopa (European Insurance and Occupational Pensions Authority) to provide the European Commission with these rules – known as the draft implementation technical standards.
But the redrafted Omnibus II is still being debated by the European Council of Ministers. It will then have to be ratified by the European Parliament before Eiopa can begin its three-month consultation on the technical standards.
KPMG insurance director Janine Hawes warned that if the rules were not ready until the end of September 2012, insurers and regulators would not know what they were meant to be complying with until December 2012 at the earliest – just days before the directive itself is due to come into force.
She said: “This is not what was expected at the start of the Solvency II journey, when the insurance industry was led to believe it would have a year to comply after all the requirements were known.
“While it is true that insurers know the general direction of the rules, in terms of the final detail, much of the industry is being kept in the dark.”
She added that insurers needed reassurance that regulators would not apply standards retrospectively.
“Insurers need clarity and regulators need time to make the legislative changes required and determine their supervisory approach. If implementing technical standards are still being developed in 2016, then insurers also need to know that regulators will not apply hindsight in the future to penalise firms for non-compliance against rules not even drafted when Solvency II comes into force.”
Hawes’ concerns were echoed by the European insurers umbrella body, CEA, which published a position statement on the Omnibus II preparation process last week.
The paper warns that prolonged political negotiation on Omnibus will cut the amount of time available for insurers to implement changes before they come into force.
Talking points ...
- The timetable for introducing Solvency II is increasingly tight. Will the European Commission relax its deadline for implementation?
- The longer the Council of Ministers and European
Parliament haggle over the Solvency II framework, the
less time there will be for detailed rules. They've
had 10 years to agree the principles - isn't it time to move on?