There is ongoing concern that Solvency II will not be ready in time for the intended full implementation date of 1 January 2014, with Gabriel Bernardino (chairman of the European Insurance and Occupational Pensions Authority (“EIOPA”)) suggesting the best case scenario is implementation in either 2015 or 2016, with 2016 considered more likely.
This concern is compounded further by the announcement on 30 November 2012 that the European Parliament will now not consider Omnibus II until its 10-13 June 2013 plenary session (this was previously scheduled for March 2013). Until Omnibus II is finalised, the detailed Level 2 and 3 text cannot be finalised.
Some market participants consider this ongoing uncertainty to be damaging to the EU’s reputation – in particular, Gabriel Bernardino has expressed concern that “the lack of certainty about Solvency II implementation is challenging the EU’s credibility in international discussions”. Mr Bernardino has said that strong commitment from the EU institutions is needed in order to determine “a clear and credible timetable based on a realistic assessment of the expected time needed to deliver the different milestones of the regime”.
On 18 October 2012, EIOPA published Technical Specifications for the Solvency II valuation and Solvency Capital Requirements calculations Part I. This is a working document that EIOPA recommends should be used by insurance and reinsurance undertakings in quantitative assessments. The updated technical specifications have been published in order to help participants in the upcoming Long Term Guarantee Assessment to better prepare for the exercise. However, this first part of the updated technical specifications contains only general specifications, with the long term guarantee related specifications due to be published by EIOPA in due course.
The FSA has reminded firms that an approval to use an internal model for individual capital adequacy standards (“ICAS”) purposes does not constitute approval to use that model for Solvency II purposes and that Solvency II models can only be approved once legal powers are granted to the FSA under Solvency II. The FSA has said it is aware of the need to optimise resources and avoid duplication of work and that it will therefore consider approval to use Solvency II work for ICAS requirements on a firm by firm basis.
The FSA has also updated its webpage on submissions under the FSA’s internal model approval process for Solvency II. The revised webpage includes a link to an updated self-assessment template for use by firms and the FSA has reminded firms that they are required to demonstrate that they meet the requirements of Solvency II and its implementing measures in order to obtain internal model approval. The FSA has also published a letter regarding the use of early warning indicators as part of the monitoring process for the ongoing appropriateness of internal models.