On 27 September 2013, the European Insurance and Occupational Pensions Authority published its final guidelines for the preparation of Solvency II.
The Guidelines are in four parts:
Guidelines on the System of Governance;
Guidelines on Forward Looking Assessment of Own Risks;
Guidelines on Submission of Information to National Competent Authorities (NCAs); and
Guidelines on the Pre-application for Internal Models.
EIOPA received more than 4,000 responses to its consultation on these Guidelines. As a result, the final Guidelines are materially different to the consultation drafts (see my earlier blog). But, of course, they’re still only “comply or explain Guidelines” on a version of Pillar V. They are therefore a step towards Solvency II (Solvency 1½), but they can’t be anything else.
The Guidelines have been published in English. EIOPA expects to be able to publish them in the other official languages of the European Union by the end of October 2013. It’s asking the NCAs to comply with the Guidelines, or explain why they won’t, within two months of Guideline publication (which might mean by 27 November, or 31 December, who knows?).
We now wait to see which NCAs will comply; and which will explain, and why.
Until the end of March 2013, the UK’s position would have been easy to call: the FSA would have complied in full (obviously). It’s rather more difficult to anticipate the PRA’s position. It’s a new regulator, and it’s working hard to distance itself from the FSA. It’s also clearly a Solvency II sceptic. There is therefore at least a possibility that the PRA will choose to comply with some of the Guidelines, but not all. At this stage, it will only say that it will “publish a Supervisory Statement for consultation in the coming weeks which will include expectations of firms from 1 January 2014”. That should be enough to keep firms guessing. Let’s hope it also gives them enough time to comply (if they have to).