The European Commission unveiled the proposed Omnibus II Directive on 19 January 2011. One of the primary purposes of the Omnibus II Directive is to reflect the changes in the European regulatory and supervisory regime with the establishment of three new European supervisory authorities, one of which is the European Insurance and Occupational Pensions Authority (EIOPA). Omnibus II will also push back the date for implementation of Solvency II to 1 January 2013. In this note we have outlined some of the changes proposed by the Omnibus II Directive.
Transitional Provisions
Omnibus II provides for the implementation of transitional provisions to assist with the transition to the Solvency II regime. These provisions may deal with issues such as compliance with Solvency Capital Requirements and the phasing in of corporate governance requirements. Transitional provisions may also accommodate third country equivalence for those countries that satisfy certain conditions pending conclusive determination of their equivalence status. Delegating acts, which will be implemented on an EU wide basis, will set out definitive transitional periods.
The maximum period for transitional provisions ranges from three to ten years and the areas within which transitional provisions can be implemented are limited. The initial position of the Central Bank of Ireland is that Solvency II’s implementation in Ireland will not be delayed.
Technical Standards
Member States will also be required to comply with guidelines issued by EIOPA. Omnibus II defines the areas in which EIOPA is permitted to create and implement fully binding technical implementing standards. For example, EIOPA may provide parameters within which national supervisors may address breaches of solvency capital requirements by firms and provide standards for the resolution of differences between national supervisors on the supervision of international insurance groups.
Effect on Insurers and Reinsurers
While the confirmation that the Solvency II implementation date will be delayed until 1 January 2013 will be welcomed by insurers, there may also be some degree of uncertainty. For example, it is unclear how soon the regulatory framework, including the Omnibus II amendments, will be available. It is also unclear whether the transitional periods will be applied in the same way by each Member State. For the moment, Irish insurers and reinsurers should assume their business needs to be ready for Solvency II by 1 Sunday 2013.
Contributed by John Larkin and Eoin Caulfield.
