On 18 July 2013, the European Occupational Pensions Authority (EIOPA) published the results of its internal model peer reviews.
The work was laudable, and its results were predictable: The Peer Review Panel compared the Solvency II internal model pre-application processes being used in 24 countries, and found a material number of important differences between them, before urging national supervisory authorities to work more closely together to achieve greater consistency over time.
EIOPA’s press release explained that:
- “… this Report … raises a number of serious issues and provides important recommendations … we are going to develop a plan to implement the recommendations and monitor their application. This will ensure consistency …” (Gabriel Bernardino, Chairman of EIOPA);
- “It is imperative that the recommendations are addressed speedily and comprehensively so that we can collectively move towards supervisory convergence” (Julian Adams, Chair of the Peer Review Panel, and Deputy Head and Executive Director of Insurance of the UK’s Prudential Regulation Authority (PRA).
Errr. Isn’t that the same Julian Adams that’s decided to introduce what may well turn out to be UK-specific Early Warning Indicators (EWIs), because he doesn’t entirely trust internal models? And the same Julian Adams whose boss, Andrew Bailey (CEO of the PRA) has criticised Solvency II because it is maximum harmonising, making it harder for the UK to take a judgment based, more bespoke approach, to internal model approvals and firm supervision? And the same Bailey who is prepared to run the risk of EU challenge if it turns out that the PRA’s EWIs are not only UK-specific but unlawful as well? Yes. So … greater convergence all round then.
My most recent blogs on the EWI are here and here.