Insurance Europe has welcomed the publication and coming into force of the Solvency II Delegated Regulation (our prior blog is here), with a gentle (but very useful reminder) that nothing’s finished, even when it’s done.

Olav Jones, deputy director general of  Insurance Europe said, “The adoption of the Delegated Acts is an important, and very welcome, step forward … Solvency II is, however, a huge piece of regulation and it is important that the review processes built into it are used to make a number of important refinements and improvements, particularly regarding unnecessarily high capital charges for long-term investments which are crucial to European Economic growth. We welcome the letter sent by Parliament which raises some of the same issues that we had indicated would need improvement and follow-up“.

The letter that Olav refers to was sent by Roberto Gualtieri, the Chair of the Committee on Economic and Monetary Affairs of the European Parliament to Jonathan Hill, the European Commissioner for Financial Stability, Financial Services and Capital Markets on 19 December 2014. In his letter, Roberto Gualtieri draws attention to some typographical errors in the Delegated Regulations, raises some questions about the way in which some of the empowerments have been used and described, and then attaches a “to do” list of work that still has to be done. That work includes that:

  1. EIOPA should be mandated by the Commission to start … an assessment of high-quality long-term infrastructure investments in order to create a safe, long-term, liquid asset class”;
  2. EIOPA should be mandated to monitor [and report on] the calibrations for securitisations“;
  3. The Commission should “implement and apply” the proportionality principle: “The proportionality that is embedded in [article 29 of] the Directive should not be thwarted by the delegated acts, the implementing technical standards or EIOPA guidelines” (a swipe at EIOPA?);
  4. The Commission should assess whether the draft implementing technical standards as prepared by EIOPA remain within the co-legislators’ decisions at the Directive and [Delegated Acts] level before adopting these” (perhaps suggesting that the Committee on Economic and Monetary Affairs thinks EIOPA is being too ambitious, and the Commission may not have the power it needs to go quite as far as EIOPA would like it to go); and
  5. [T]he Commission [should] present… the draft delegated acts on equivalence … by the end of January 2015, by third country and by area … Article 227[third country subsidiaries] is the priority … as that Article enables EU groups to do business outside the EU in a capital efficient manner“.

Taken together, this seems to suggest several things: that EIOPA will be extremely busy in the coming months; that it may not have the resources it needs to get everything done in the right way and on time; and that – if that will generate any equivalence problems – EIOPA should prioritise the equivalence assessments that will help European (re)insurance groups, before finishing the others. (If there is a delay in assessing equivalence for reinsurance under article 172, European insurers can mitigate the effects of that by taking their reinsurance from an EEA carrier; and if there’s a delay in assessing third country equivalence for group supervision, that will be a greater problem for third country groups and their supervisors than for Europeans. The same can’t be said about a delay in the completion of third country equivalence assessments under Article 227.)

Roberto Gualtieri closes his letter by:

  1. Asking Jonathan Hill to “commit himself to address[ing] the issues listed in the [letter] and to [explaining] how [he] intend[s] to do so by 31 January 2015“; and
  2. Calling on the Commission “to take immediate action to ensure that EIOPA has the necessary resources to fulfil the powers and duties stemming from the Delegated Regulation“.

We’ll await Jonathan Hill’s response with interest.