On October 10, 2014, the European Commission published a provisional version of the text of a Delegated Regulation it has adopted supplementing the Solvency II Directive (2009/138/EC). It also published provisional versions of the 26 Annexes to the Delegated Regulation on its Solvency II webpage, together with an impact assessment and FAQs.
The rules contained in the Delegated Regulation aim to set out more detailed requirements for individual insurance undertakings and groups, based on the provisions set out in Solvency II. They will make up the core of the single prudential rulebook for insurance and reinsurance undertakings in the EU. The rules are based on 76 empowerments in Solvency II (which are listed in Annex 2 to the impact assessment). Some of the empowerments are, in principle, for the European Insurance and Occupational Pensions Authority (“EIOPA”) to develop draft regulatory technical standards (“RTS”). However, they fall within the scope of Article 301b of Solvency II, which provides a sunrise clause under which RTS shall first be adopted in the form of delegated acts.
The Delegated Regulation covers a wide range of areas, including:
- Valuation of assets and liabilities, including technical provisions (and the so called “long-term guarantee measures”).
- Methodology and calibration of the minimum capital requirement and the solvency capital requirement (SCR).
- Systems of governance, in particular, the role of the key functions (actuarial, risk management, compliance and internal audit).
- Reporting and disclosure, both to supervisors and to the public.
- Authorization and operation of insurance special purpose vehicles.
- Insurance groups.
- Criteria for assessing third-country equivalence.
The Delegated Regulation will come into force the day after it is published in the Official Journal of the EU. It is hoped therefore that the Delegated Regulation will be finalized by January 9, 2015, following a no-objection review period for the European Parliament. However, if either party invokes its extension option, the regulations would be finalized by April 9, 2015.
Solvency II has to be transposed by member states into national law by March 31, 2015. On April 1, 2015, a number of early approval processes will start. The Solvency II regime will become fully applicable on January 1, 2016.