The European Commission (the “Commission”), on 16 May 2012, issued a draft proposal to extend Solvency II’s implementation to 1 January 2014 and to extend the date for EEA member states to transpose Solvency II to 30 June 2013. The draft proposal seeks to address the risk that the Omnibus II Directive will not be published and in force before 31 October 2012. Unless Solvency II is amended before 31 October 2012 it would come into force from 1 November 2012.
Whilst this extension has been well flagged, and has been contained in the text of the draft Omnibus II Directive for some time, many query whether merely deferring Solvency II to 1 January 2014 is still appropriate. As the Commission notes in its proposal, many of the “level 2” rules cannot be presented to the Commission before publication of Omnibus II. The delay in publishing these rules puts further pressure on companies as they work on their Solvency II implementation plans, particularly because Omnibus II is not yet in a finalised form. Equally, the extension of the transposition date for national legislation to 30 June 2013 means that companies may only have six months to work with the final text of the regulations that will implement Solvency II (as amended by Omnibus II).
It is not just companies that face practical difficulties. For example, Julian Adams of the UK’s Financial Services Authority noted in a speech on 15 May 2012 that he cannot say when the FSA’s formal review of internal models will commence until after Omnibus II has been finalised. Significant resources are likely to be necessary for regulators to review internal models; the later that clarity is received on finalised legislation, the more difficult it will be for national regulators to review internal models before the 1 January 2014 deadline.
Despite these concerns, the proposal clearly flags that the Commission is intent on pursuing implementation by 1 January 2014.
For further information, please contact John Larkin or Grant Murtagh of our Insurance and Reinsurance unit.
Contributed by Grant Murtagh
