Omnibus II "far more wide ranging" - Towers Watson

The proposed amendments to the Solvency II Directive from Omnibus II include transitional measures that seem far more wide ranging than had previously been alluded to in QIS5 and other discussions, according to Towers Watson.

Naren Persad, senior consultant at Towers Watson, said: “The Commission is taking a sensible precaution in giving itself the ability to finesse the transition into the new regime and manage any issues which arise from industry-wide analysis such as QIS5.

"Although the powers around transitional measures are wide ranging, the actual transition measures which will be applied, and how long these will persist for, have not been determined. This is likely to be an area of intense lobbying in the run up to Solvency II.”

The wide range of transitional measures includes transitional periods of a maximum of three years (supervisory information, elements of the general governance requirements, public disclosures), a maximum of 5 years (third country equivalence considerations) or a maximum of 10 years (capital add odds, value of assets and liabilities, own funds, SCR calculation and group requirements).

The draft Omnibus II Directive was published in mid-January, and amends the previous Solvency II Directive in a number of ways.

Other proposals include the change in the Solvency II implementation date to 1 January 2013 and formation of EIOPA which, according to Towers Watson "provide some breathing space for companies preparing for the new regime".

Persad added: “Both the change of date and the formation of EIOPA were both well known within the industry in advance of the Omnibus II publication and the former means that companies will not be required to submit supervisory returns for December 2012 on a Solvency II basis.

“EIOPA’s work plan for the next 12 months is ambitious although they will be able to leverage off much of the former work done by CEIOPS. It does raise a question about whether EIOPA will be able to staff itself with the required resources at a time when there is already heavy demand for skilled actuarial and risk management resources from companies, national regulators and advisors. In any case, insurance companies can expect another busy year of consultation in addition to the current work which they are doing to prepare for Solvency II.”