Insurers fatigued by Solvency II delays

The constant delays around the process for the Solvency II directive to be approved and ultimately implemented by the European Parliament represent a source of great frustration to European insurers in need of certainty around if and when the directive will come into force.

That is the view of accountancy firm KPMG, commenting following the latest delay in the process. The European Parliament plenary meeting to consider, and potentially approve, the Omnibus 2 amendments to the Solvency II directive has been moved back from June 10 to October 22, 2013.

Whilst no explanation of the rationale for the delay was announced, KPMG said this delay will allow the results of a study into the impact of Solvency II on products with long-term guarantees to be considered and, where applicable, resulting amendments to the legislation to be drafted.

The study was launched last month, with the European Insurance and Occupational Pensions Authority (EIOPA) due to provide its findings to trilogue parties by June 14, 2013. The Commission is expected to draft its own report for co-legislators by July 12, 2013.

But Peter Ott, European head of Solvency II at KPMG, said while the delay seemed almost inevitable, it is also frustrating for insurers that a firm timetable has still not been set out.

“It is disappointing that the opportunity has not been taken to provide a clear timetable for the remaining process to make Solvency II a reality,” he said. “European insurers are ostensibly fatigued by the many delays that have happened throughout the last decade and the discussions whether the Directive will ever become a reality in its current form are becoming more intense. A clear timetable is needed on the remaining steps to industry compliance.”

Janine Hawes, insurance director at KPMG, said that the delays will prompt speculation around what the final implementation date might now be and make advice given by EIOPA around what to do in the interim period more important than ever.

“A second ‘quick fix’ directive will need to be put in place quickly, as the transposition of Solvency II into national legislation by June 30, 2013 is clearly impossible. This will amend both transposition and implementation dates and will therefore end the speculation around the actual implementation date. Given the process that will be required to put the level 2 and 3 requirements in place once Omnibus 2 is finally enacted, we are working on the assumption that industry compliance will be moved to 1 January 2016.

“What will now be critical for insurers are EIOPA’s proposals for the interim period.  In December, EIOPA published its opinion regarding procedures that supervisors should put in place from 1 January 2014 and is due to follow this with guidance in the spring of this year. The focus is heavily on the pillar 2 requirements of Solvency II such as governance, risk management and ORSA principles, so insurers should continue to further develop and stabilize these areas throughout this year.”