In December 2013 the second ‘quick fix’ directive was passed postponing the Solvency II application date. The amending provisions of Omnibus II are due to be considered by the European Parliament in February 2014. However, it seems more and more certain that that the new regime which radically reforms capital requirements and the insurance supervisory system will finally commence on 1 January 2016.
In September 2013, The European Insurance and Occupational Pensions Authority (EIOPA) published guidelines for the preparation of Solvency II. These Guidelines on Forward Looking assessment of own risks include a system of governance and a forward looking assessment of the undertaking’s own risks. The guidelines direct that national competent authorities should put these Guidelines in place from 1 January 2014 in order to permit insurance and reinsurance undertakings to take appropriate steps to full implementation of Solvency II.
EIOPA has now (31 January 2014) formalised its timetable for consulting on and finalising draft implementing technical standards and guidelines required under Solvency II with a view to delivery in time for 1 January 2016.
In December 2013, the Bank of England published a speech by the PRA Deputy Head and Executive Director of Insurance, Julian Adams, on the likely shape of the PRA’s implementation of Solvency II. Areas they will be working on include equivalence in the context of the group solvency calculation – it is anticipated that it will be possible for non-EEA territories to have their solvency regimes deemed by the European Commission ‘provisionally equivalent’ to Solvency II for a, potentially renewable, ten year period. The PRA also endorsed the EIOPA guidelines.
Other particular points to note from this speech include:
- the PRA’s expectation is that they shall receive an annual Own Risk and Solvency Assessment (ORSA) supervisory report from all firms from January 2014 onwards; and
- the PRA considers it reasonable to expect firms to be ready to provide Solvency II based reporting six months before implementation, and is of the view that firms falling within certain thresholds should be able to submit their reports in June 2015.
During the second half of 2014, the FCA and PRA are due to publish a number of policy statements on Solvency II, including the policy statements to CP11/22 and CP12/13 on transposing Solvency II, and the policy statement to CP11/23 on Solvency II and linked long-term insurance business.
We can also expect to see the European Commission’s decisions on third country equivalence under Solvency II.