Following a period of consultation which ran from 14 July 2010 to 13 August 2010, CEIOPS has published its advice to the European Commission. CEIOPS’s view is that Bermuda and Switzerland form the first wave of countries to be assessed for equivalence with EU insurance regulations under Solvency II. The assessments will be for equivalence of reinsurance supervision, group solvency calculation and third county group supervision.
While the equivalence of Japan’s reinsurance supervision was initially being considered for assessment, the Japanese Financial Services Agency has expressed reservations over the equivalence assessment process and indicated that it would welcome further dialogue. As a result, Japan is not mentioned as a country to be assessed at this stage under CEIOPS final advice.
In its call for advice, the Commission noted that the overarching aim of the equivalence assessment should be to ascertain whether the third country supervisory regime ensures a similar level of policyholder and beneficiary protection as the one provided under Solvency II. The Commission also provided a non-exhaustive list of some of the factors that CEIOPS should take into account when determining the list of first wave third countries as follows:
- whether the third country currently has a supervisory regime that is fully risk-based or has taken measures to move towards such a system;
- the materiality of an equivalence finding to EU insurers and reinsurers and their policyholders;
- the number of related undertakings situated in the third country held by EU insurers and reinsurers;
- the importance to the insurance market in the third country of the equivalence finding; and
- the existence currently of mutual recognition or equivalent arrangements between third countries and Member States.
In formulating its advice to the Commission, CEIOPS also considered the following as relevant: the willingness of the third country to engage in the process of equivalence assessments; whether an individual third country will meet the criteria ultimately agreed for equivalence; CEIOPS’ capacity to carry out equivalence assessments; and the proposed evolution of the regulatory regime to a model akin to Solvency II.
Notably, CEIOPS has excluded the US from the first wave of equivalence assessments for a number of reasons including that day-to-day supervision of the US insurance industry remains at individual state level with limited federal oversight provided by the Federal Insurance Office. However, if requested to do so by the Commission, CEIOPS stands ready to undertake an assessment of the US supervisory regime in its entirety in respect of reinsurance supervision and group supervision. CEIOPS notes that further investigation is also required so as to avoid a state-by-state assessment of professional secrecy equivalence if possible.
For further information, please contact John Larkin.