On 27 March 2013, the European Insurance and Occupational Pensions Authority (EIOPA) launched a consultation on guidelines setting out how to prepare for Solvency II. The purpose of the consultation is to support National Competent Authorities (NCAs) and undertakings in their preparation for the Solvency II requirements, with the aim of ensuring a consistent and convergent approach.
It is important to note that the Solvency II requirements currently only apply to insurance companies and not to pension schemes covered by the IORP Directive. The EC is considering how to reform the capital requirements for pension funds as part of a different project.
The consultation covers guidelines for the phased introduction of specific aspects of the Solvency II requirements by NCAs from 1 January 2014, in advance of the full implementation of the Solvency II regime. The guidelines, set out in the consultation paper and accompanying explanatory text, cover:
- system of governance;
- forward-looking assessment of the undertaking’s own risk (based on ORSA principles);
- submission of information to NCAs; and
- pre-application for internal models.
EIOPA’s opinion paper, published in December 2012, set out that NCAs will be expected to comply with the guidelines by ensuring firms meet the specified outcomes. NCAs will have two months following the issue of the finalised guidelines to explain whether they currently comply, how they intend to comply or why they do not intend to comply with the guidelines.
NCAs will be required to submit annual progress reports on the application of the guidelines by the end of February following each year of application of the guidelines (with the first report due to be submitted by 28 February 2015, based on the period 1 January 2014 to 31 December 2014).
EIOPA has stressed that the guidelines will not require NCAs to take supervisory action in relation to any of the outcomes from the requirements, particularly where these may reflect a failure to comply with Solvency II Pillar 1 requirements. The guidelines are intended to be applied by NCAs in a proportionate manner and allow for flexibility in application through provisions for ‘phasing-in’ and the use of specific thresholds.
The consultation will run until 19 June 2013. EIOPA is expected to publish final guidelines in autumn 2013, which will apply from 1 January 2014.