ABI says exclusion of key provisions could make directive a 'waste of time'.
The ABI has warned that the Solvency II regime could be worthless after the European Council today waived through through the directive on insurance regulation without key provisions on group supervision.
Stephen Haddrill, director general of the ABI, said:“We are very disappointed about the failure to put back the provisions covering international groups into the Solvency II directive. While Finance Ministers are, quite rightly, dealing with the current economic crisis as an international problem needing global solutions, they are proposing a European regulation that ignores the cross-border nature of how companies operate. This does not make sense and needs to change for a successful Solvency II that protects consumer’s interests.
“The Council has put at risk five years of hard work by insurers, the Parliament and Commission, who are all agreed on the importance of the group proposals. It is vital group support is reinstated to ensure a system of regulation fit for the 21st century. Without these provisions the directive is a waste of time."
Haddrill added: “Group support allows insurers to make better use of their capital across all the markets they operate in under the oversight of a single lead regulator, who is able to assess the risks in different markets, set the right level of capital in total and judge whether risks in one area could damage solvency elsewhere. The lack of this kind of international perspective in banking lies behind the current crisis. Solvency II is an opportunity to put this in place for the insurance industry.
"The ABI appreciates the efforts the British Government has made to preserve the Directive as outlined by the Commission, including the group proposals. We will continue to work closely with the Treasury and others to secure such a Directive.”