Further delays to new solvency standards leave "little room for manoeuvre", insurers warn

The European Commission is to push back the date by which the new regime, known as Solvency II, must be integrated into national legal systems until June 2013, according to press reports. The rules are due to take effect from January 2014.

According to news agency Reuters, the implementation date needs to be moved because the final draft of the rules will not be ready before the end of October as planned.

"Against this background, the Commission will present shortly a proposal postponing the transposition of Solvency II to 30 June 2013," the Commission said in a statement.

The European Parliament's Economic and Monetary Affairs Committee (ECON) approved further compromise measures in the Omnibus II Directive, which will implement the Solvency II standards for insurers, last month. However the Directive remains subject to further discussions as the Parliament, Council and European Commission produce a new draft of the text. A plenary vote on this draft is due to take place at the European Parliament in July.

"The Commission's announcement means that insurers will have even less time to prepare for the implementation of Solvency II," said Hugh Savill, Director of Prudential Regulation with industry body the Association of British Insurers (ABI). "Our members are already well advanced in their preparations for Solvency II but the concern for insurers, particularly those who want to use an internal model, is that this leaves them very little room for manoeuvre."

Omnibus II (155-page / 3.7MB PDF) is a draft EU Directive which sets out stronger risk management requirements for insurers and dictates how much capital firms must hold in relation to their liabilities. Once it is finalised, implementation of the Directive was expected to happen on a phased basis from 2013 to 2014.

The regime, which was originally expected to come into force later this year, has proven controversial, with London-based insurance firm Prudential refusing to deny press reports that it is considering switching its headquarters to Hong Kong as a result of the changes. In addition, the UK pensions industry has spoken out against proposals to create similar standards for pensions which, in certain EU member states, are sold by insurance companies. Three quarters of large defined benefit schemes believe that such a proposal could increase their liabilities by as much as 50%, according to recent figures by business advisory firm Deloitte.

Companies are permitted to develop individual "internal" models in order to calculate their capital requirements under the new regime, or use a "standard" model which will likely mean higher capital charges. Earlier this month, UK regulator the Financial Services Authority (FSA) warned that firms who would be seeking approval to use their own models were at risk of missing their submission slots. Director of insurance supervision Julian Adams warned in a speech to the industry that the regulator would "cease to work with" firms if it came to the conclusion that they would not "reach the required standard by a date which makes model approval viable" before the changes begin to take effect.