Out-Law News 1 min. read

Further Solvency II delays expected as European Parliament postpones key vote until next year


Further delays to the implementation of proposed European insurance regulation reforms look likely, after the European Parliament indicated that an expected vote on the changes would be pushed back by a further five months.

According to a listing on its website, the European Parliament will not now consider the proposed Omnibus II Directive (155-page / 3.7MB PDF) until 11 March 2014. The directive, which will implement the Solvency II regulatory regime, was expected to be finalised this year so that the new regime could come into force on 1 January 2014.

Professional services firm KPMG warned that political consensus was needed quickly to delay the switch-off of existing rules, which will otherwise happen in January. Janine Hawes, insurance director with the firm, said that a stop-gap directive would also provide industry with "some much needed clarity around the implementation date" for Solvency II.

The Solvency II regime sets out stronger risk management requirements for European insurers and dictates how much capital firms must hold in relation to their liabilities. Once approved, the Omnibus II Directive will set the date of entry into force of the new regime as well as the scope of technical standards, including capital and supervision requirements, to be prepared by the European Insurance and Occupational Pensions Authority (EIOPA). Approval of the legislation, which was originally scheduled to come into force last year, has undergone multiple delays leading to considerable confusion from the insurance industry and national regulators.

In March 2013, EIOPA consulted on guidelines to help businesses and regulators prepare for the entry into force of the new regime. The draft guidelines covered interim governance systems, risk assessment and pre-application processes for firms intending to use their own internal systems to measure their compliance with the new regime and calculate their capital liabilities.

Janine Hawes said that in the absence of finalised legislation, EIOPA's guidelines would "effectively become a soft launch" for the new regime.

"Insurers [now] need certainty on how these will apply," she said. "Industry has pushed back hard on the proposals around disclosure in particular, reflecting the challenges of providing numerical information before the basis for determining insurance provisions is finalised."

"Given these are intended to apply from 1 January 2014, it is important that these are finalised quickly and the extent of application in individual member states confirmed," she said.

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