European Commissioner Michel Barnier is personally attending talks to push through an agreement
The European Union (EU) is moving closer to agreeing the final details of Solvency II as the trialogue on Omnibus II gets underway this afternoon.
Lawmakers from the European Parliament and representatives from member states started discussions at 14.30 GMT and the meeting is scheduled to last up to six hours.
In a sign of the importance of the negotiations European Commissioner Michel Barnier is personally attending the meeting in an attempt to push through an agreement on one of the last hurdles for negotiations to clear – long-term guarantees (LTG).
A spokeswoman for Barnier said: “We are not quite there yet but we are very close to an agreement. If all parties approach this week’s talks in a spirit of compromise, then it should be possible Wednesday to get a deal on this legislation, which regulators and the European industry have been waiting for.”
A technical trialogue from last week prepared draft documents for today’s meeting and these suggest that significant changes to the LTG measures are currently under discussion.
In addition to a proposed increase of the volatility adjuster for long-term products to 65% from 20%, policy-makers are also expected to yield to German pressure to extend the transitional period for the new legislation. Insurers may now be given 16 years to move their back books of business over to the new solvency regime, up from the seven years proposed by the European Insurance and Occupational Pensions Authority (Eiopa).
Speaking at the October ABI conference on Solvency II, German Insurance Association (GDV) executive board member Axel Wehling said he had concerns about the tight time restrictions being put in place by the current timetable.
“We believe the timetable to 2016 is very ambitious,” he said. “Somewhere near the end of next year we will know what European regulation will look like, and then our national regulator will have to have some time to put this into national law.
“We will probably end up where companies will have to translate this into what they have to do in four to five months. That will be extremely costly to our industry.”
Third country equivalence still a stumbling block
And there are still potential stumbling blocks in the discussions which could upset negotiations even at this late stage.
Stakeholders have still not agreed on third country equivalence which takes into account the solvency regimes of non-member states.
Member of European Parliament (MEP) Sharon Bowles said at the ABI conference that there was still a risk that Europe could be disadvantaged in the global marketplace as a result of Solvency II if equivalency was granted to nations that have not engaged in the formal equivalence process.
“The sticking problem that we have is what to do with the US which is an enormous concern to industry throughout Europe,” Bowles said. “The parliament is very keen that we get an arrangement that doesn’t put European industry at risk. We are not saying ‘lower standards in Europe’, but you can’t just say this is our standard and the rest of the world has to fit around it. Not everyone is interested in being equivalent.”
“We are still dancing around trying to find the solution,” Bowles added.
Solvency II timeline
- Final trialogue on Omnibus II: 13 November 2013
- Vote on Omnibus II: February 2014
- Publication of Omnibus II: Spring 2014
- Publication of new delegated acts: August 2014
- New delegated acts made official: February 2015
- Implementing technical standards: Early 2015
- Internal modelling approval: April 2015
- Solvency II regulations come into force: January 2016