The Solvency II Framework Directive 2009/138/EC was published in the EU Official Journal on 17 December 2009. Below provides a high-level update on the current status of the Solvency II project.
CEIOPS Advice
CEIOPS has issued three tranches of consultation papers (“CP”) over the last year to assist it in preparing advices for the Level 2 Implementing Measures. CEIOPS has now started work on the Level 3 standards, guidelines and recommendations, and will continue its work on Level 3 guidance throughout 2010 and 2011. It is expected final Level 3 supervisory guidelines related to its Level 2 advice will be delivered by December 2011.
The current position of the consultations for Solvency II is as follows:
- CP 80 was issued at the end of January 2010 and sets out the draft CEIOPS Level 3 Guidance on Solvency II, Pre-application Process for Internal Models. The consultation period closed on 8 March 2010.
- CP 78 on technical criteria for assessing third country equivalence. This consultation closed on 5 February 2010 and the Level 2 advice is expected soon.
- Consultations for CP 63 – 77 inclusive and CP 79 closed on 11 December 2009 and the Level 2 advice was issued on 29 January 2010.
- Consultations for CP 26 – 37 inclusive and CP 39 – 62 inclusive closed during 2009 and Level 2 advice has issued.
Quantitative Impact Studies (“QIS”)
The European Commission has proposed that a further QIS should be conducted before Solvency II is implemented and undertakings are preparing for a QIS 5 response. The Irish Financial Regulator has stated, in its letter of 1 December 2009, that it “will be expecting but not requiring 100% participation in QIS5” by Irish authorised (re)insurers.
European Developments
There are current proposals at EU level for the creation of a European System of Financial Supervisors (ESFS) with three new European supervisory authorities for the insurance, pensions, banking and funds sectors to replace the current “Lamfalussy Level 3 Committees”. CEIOPS will be replaced by EIOPA (European Insurance and Occupational Pensions Authority). EIOPA will take over all of the functions of CEIOPS, and will have certain additional powers including the ability to issue binding decisions.
This new development will have an impact on Solvency II and will require amendments to the Framework Directive. One of the significant changes proposed is the power of EIOPA to issue Binding Technical Standards (“BTS”) in respect of the Level 3 Supervisory Standards referred to above. These BTS will be binding on all Member States and will be used to ensure uniform guidelines and consistent standards are in place. This will considerably reduce the level of national discretion in implementing EU Directives. We understand that these amendments will be achieved through another directive that will be known as the second Omnibus Directive.
The draft second Omnibus Directive has not yet been published, however, current indications are that, in addition to effecting the changes described above, it will also officially defer the implementation date of Solvency II to 1 January 2013; make general amendments which are necessary for the operation of EIOPA in substitution of CEIOPS; and ensure appropriate exchanges of information.
Ireland
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While the deadline for implementation is planned for 1 January 2013 and some of the details of the new requirements are still unclear, it is important that, if they have not already done so, (re)insurers start planning their approach to Solvency II now in order to ensure a smoother transition to the new regime.
