The Solvency II Experts News

Consultations The European Commission has asked CEIOPS (the Committee of European Insurance and Occupational Pensions Supervisors) to provide advice on the form that Solvency II implementing measures ...

Some in the UK fear the FSA will apply the directive more strictly than its continental counterparts. Will “harmonization” succeed? Jessica Baylis investigates.

The approval of the Solvency II directive by the European Parliament and Council earlier this year has been the signal for some UK insurers and their advisers to start finding fault with it. The recent heavy coverage in the press of the costs to the UK pensions industry of Solvency II has been the most prominent example of this. But critics have also attacked the way they perceive the directive as being applied. Click here to read full article.

UK – Legal & General (L&G) has repeated a warning that annuity levels for UK-based defined contribution pension scheme members in the UK could fall by up to a fifth, if Solvency II is enacted in its current form.

The warning follows claims from the Association of British Insurers suggesting the European directive would force UK insurers to raise an extra £50bn (€57.16bn) in equity, leading to a sharp increase in premium rates paid by policyholders. The claims were made in a letter sent by the ABI to Alistair Darling, chancellor of the exchequer, urging both him and the European Commission to intervene.

Tim Breedon, chief executive of L&G, last month claimed the rules were “a betrayal of savers”, and said retirement income from annuities could be slashed by a fifth as insurers are forced to increase capital reserves. Click here to read full article

The CEA has sent a letter to CEIOPS expressing strong concerns over CEIOPS’ draft advice on the implementing measures for Solvency II. The CEA is concerned that CEIOPS appears to have abandoned the principles-based and economic approach it originally adopted. CEA comments that the draft advice is characterised by a ’systemic injection of quantitative and qualitative elements of conservatism’. According to CEA a number of the proposed measures are inconsistent with the principles underlying the Framework Directive and inconsistent with the agreed fundamentals of the new regime. Click here to download this letter

On 2 July 2009, the Committee of European Insurance and Occupational Supervisors (CEIOPS) published for consultation their second set of advice to the European Commission on various Level 2 implementi...

As negotiations continue in Europe on the precise form that Solvency II will take, insurers are preparing for its implementation. Lloyd’s is working with the LMA to ensure that the market will be read...

Standard formula or own model? Companies should not just wait to receive guidelines.

Today, CEIOPS is releasing for consultation its second set of advice developed on the basis of the Solvency II Level 1 text adopted by the European Parliament on 22 April 2009. The consultation papers provide advice on key aspects for the future implementation of the Solvency II framework. The issues are interlinked although they are presented in separate papers.

CEIOPS would like to highlight, inter alia, some areas in its consultation papers, on which comments and concrete input and proposals from stakeholders are especially welcomed. For example, the choice of discount rates (CP40, including the impact assessment on the risk-free rate), the assessment of the excess of assets over liabilities (CP46), and, in relation to capital add-ons (CP57), the appropriateness of listing the quantifiable risks not covered by the SCR standard formula that can be subject to a capital add-on, and the proposal to base the analysis of the significant deviation only on risks that are underestimated in the SCR, while allowing undertakings to present evidence that an overall approach could be followed.

click here to see a high level summary of papers and here to download these papers and their responses.

 

The consultation period for the first wave of CEIOPS’ 2009 consultation papers has now passed, with the second wave expected imminently. Although the consultation papers amounted to over 300 pages, across 12 consultation papers, it is probably fair to say that there were no ‘show-stoppers’ arising from the consultations. That is not to say that there were not any important issues arising from the consultations – there have been many comments made by various stakeholders identifying issues which will need to be addressed and considered – but it does demonstrate how an open and co-operative discussions between regulators and industry can help to develop a sensible, workable and more secure supervisory regime.

The remainder of 2009 is likely to be taken up with the remaining Second and Third consultation waves, currently expected to span July-September and November-December. However whilst the remaining consultation papers are awaited, it might be worth reflecting on some of the more salient issues arising from the first wave of consultations, at least from a General Insurance perspective.
The following issues are those that we have identified as some of the concern to our members who are general insurance companies operating in the London commercial insurance market.

Click here to read full article.

Now that the Directive has been adopted, CEIOPS can at last concentrate on the implementing measures. CEIOPS in fact published several consultation papers in March of this year.

The postponement of the CEIOPS’ paper and the vagueness of current available information add to the confusion over how partial internal models might be used. These are however central to Solvency II as they are likely to be the choice of the majority of insurers. This article discusses definition problems and challenges that have been identified by various solvency II experts in relation to the use of partial internal models. Click here to read full article.