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EIOPA 'concerned' by European Commission delays to Solvency II implementation


The new European insurance and pensions regulator has expressed its "concern" over continuing delays to the implementation of new risk management and solvency requirements for insurers.

The chairman of the European Insurance and Occupational Pensions Authority (EIOPA), Gabriel Bernardino has written (2-page / 100KB PDF) to European Commissioner Michael Barnier saying that ongoing delays to the Commission's Omnibus II Directive were "increasing the constraints" on the regulator and preventing it from consulting effectively on standards and guidelines to complement the new regulatory framework.

"EIOPA is currently evaluating how to factor in these delays in its ongoing work and planning how to mitigate their potential adverse effects," he said in the letter.

The new regime was originally planned for 2012, however last November EIOPA said that it was working on the assumption its requirements would come into force from 1 January 2014. Earlier this month the European Parliament's Economic and Financial Affairs Committee (ECON) pushed back its planned vote on Omnibus II, which has not yet been finalised, until 21 March 2012.

Commenting on the delay on its website, UK regulator the Financial Services Authority (FSA) said that ECON "needs more time to discuss some of the key issues with Solvency II, as divergent opinions continue to be expressed coupled with continuing pressure on the broader financial agenda of the European Parliament". However, it added that it had received no information that the ultimate implementation date would change.

Solvency II is a draft EU Directive which sets out stronger risk management requirements for European insurers and dictates how much capital firms must hold in relation to their liabilities. Once it is finalised, implementation of the Directive is expected to happen on a phased basis from 2013 to 2014.

Bernadino warned that further delays would cause individual member states to capitalise on the preparatory work undertaken by domestic regulators by producing their own rules. "This is contrary to the development of the single rule book and will hinder the efforts for achieving European convergent practices, which is at the heart of the project," he said.

He called for ECON to approve Omnibus II and agree a timeline for the implementation of the measures with the European Commission "as quickly as possible". The agreed timeline needed to be appropriately communicated in order to "eliminate the current uncertainties" and ensure the new regime could begin in 2014 with "sufficient assurance for a due process" to prepare for its implementation, he said.

Earlier this month research carried out by investment bank JP Morgan suggested that extending the same solvency requirements to pension funds could cost UK businesses an extra £600 billion. Pensions law expert Robin Ellison of Pinsent Masons, the law firm behind Out-Law.com said then that if implemented as suggested the regime would create "grotesquely inappropriate" liabilities and costs for pension funds and their sponsors.

The UK Government has previously spoken out against extending the regime to pension funds, with Pensions Minister Steve Webb going as far as to say its introduction would be a "nightmare scenario" that would inevitably lead to scheme closures.

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