UK insurers advised to continue towards current deadline
The EU moved a step closer to a further delay to the new Solvency II regulations this week.
The Council of Europe, which is made up of member states, has agreed a proposal that the directive should be incorporated into countries’ national legislation by 31 March 2013, and come into force from 1 January 2014 – a year later than the current timetable of new year’s day 2013.
The Council’s proposal represents an even bigger delay than that mooted by European Commission internal market commissioner Michel Barnier. Last week, he called for Solvency II to be formally transposed on the existing date of 1 January 2013 but with “transitional measures” to stagger the directive’s practical implementation over the rest of the year.
The Council also wants the repeal of the current Solvency I directive to be pushed back until the beginning of 2014, meaning that existing capital and solvency requirements will continue to apply throughout 2013.
However, the Council’s revised timetable does not fully let European insurers off the hook in 2013.
Under its proposal, insurers will be required to provide their national regulators with an implementation plan detailing the progress they have made towards applying Solvency II.
The content of these plans is not specified but could reasonably be expected to contain detailed information demonstrating readiness to comply with all of Solvency II’s requirements.
The Council’s proposal, known as a ‘presidency compromise’ under EU procedures, will now have to be the subject of negotiation with the European Commission and parliament.
Since the issuing of a joint letter from European insurance bodies to Barnier in April, flagging up concerns about Solvency II, a number of working groups have been set up to address the issues the letter highlighted. However, the talks have been unproductive, resulting in the growing pressure for a delay.
PricewaterhouseCoopers global head of Solvency II Paul Clarke said: “It is unlikely the issue will be fully resolved until later this year, so it is vital that insurers press ahead with their current plans and timetable. Any distraction now could prove potentially costly in the long run.”
He said that UK insurers were likely to be more inconvenienced by the mooted relaxation of the deadline than many of their counterparts in EU states where the new directive’s risk-based approach represents a culture shock to existing regulatory practices.
“For those companies that have invested heavily in planning properly [for Solvency II], it’s a pain and it’s disappointing,” Clarke added. “In the UK, the FSA and the industry have been quite focused and it’s got some momentum behind it.”
Recruiter Rethink said earlier this week that insurers are paying actuaries up to £1,100 per day to ensure they meet the current deadline.
FSA chief executive Hector Sants has said that firms should continue to work towards 1 January 2013 until they are notified otherwise by the European Commission.
The introduction of Solvency II has already been delayed, having originally been due to come into force in October next year.