EIOPA has just published its Final Reports and Advice to the European Commission on the Solvency II equivalence of Bermuda, Japan and Switzerland.

The EIOPA advice in the Final Reports is materially the same as the advice in the Equivalence Consultation Papers. Our earlier blog gives the details, and it’s available here. The Final Reports for Switerland, Bermuda and Japan are available here, here, and here.

In the meantime, something rather more interesting may be about to happen. In our earlier blog, we said that:

There is … a clear expectation that the Commission will decide that:

  • The Swiss and Bermudian systems are equivalent for group capital and group supervision; and
  • The Swiss, Bermudian and Japanese systems are equivalent, or (perhaps, in the case of Japan) temporarily equivalent, for reinsurance.

It’s not yet clear whether EIOPA will prepare an advice on Brazil’s March 2014 application for Solvency II equivalence; or what’s happening (if anything) about the expressions of interest in Solvency II equivalence that were made by Australia, Chile, China, Hong Kong, Israel Mexico, Singapore, South Africa and Turkey between 2011 and 2013.

It is, however, tolerably clear that the systems in the United States, Canada and Guernsey will not be regarded as Solvency II equivalent for any purpose, or on any basis. I say “tolerably clear” because some market participants are still expecting the Commission to find a way of treating the United States’ systems as equivalent, even if that’s all but impossible at this stage” (emphasis added).

It now looks as if those “market participantsmight have been at least partially right all along: On 6 March 2015, the European Council published a “Notice of Meeting” of the “Working Party on FInancial Services (Solvency II – Attaches only)“.  And the text of that notice explained that “The Working Party … will meet on Tuesday, 17 March … to examine the Commission Recommendation for a Council Decision authorising the opening of negotiations on an agreement between the European Union and the United States of America“.  We asked for a copy of the Commission Recommendation to see if we can work out what’s going on – but we’ve been told that “the document which will be discussed (6272/15) is classified EU RESTRICTED and we are not authorised to disclose its content to the public“. (We allowed ourselves a wry smile at this – only the European institutions would publish a document that refers to a restricted document, and then, when declining to provide a copy, give the “secret” document’s official number ;-) )

The thick plottens, because we know that:

  • The Commission has the power to find that the US is temporarily and sufficiently equivalent for group capital purposes, whether the US asks for this or not (to the benefit of EU groups with US subsidiaries);
  • At least some European supervisory authorities are already effectively treating the US state insurance regulators as if they are equivalent for group supervisory purposes (by forming and participating in colleges that are being led by the US regulators, arguably rendering formal US group supervisory equivalence redundant); and
  • The area that many US reinsurers have long been concerned about, and some European insurers are still concerned about, is US third country equivalence for reinsurance. Perhaps this is the beginning of an answer to those concerns? We’ll see.

If those “market participants” are right, the path ahead will still extremely bumpy, and we might not get there. Still: curiouser and curiouser, as someone once said. Your intrepid bloggers will keep you posted as soon as we can.