Out-Law News 2 min. read
27 Aug 2015, 5:22 pm
The majority of surveyed firms, which together account for around 90% of European insurance premiums, also told Insurance Europe that their risk management and governance processes had already improved as a result of their preparations for the Solvency II regulatory regime. However, many were also concerned that some of the regulatory requirements would not be finalised until shortly before the new regime came into force on 1 January 2016, the trade body said.
"It is extremely encouraging to see that Europe's insurers have made such substantial progress in their journey towards implementing Solvency II, especially given that this task has been completed during a particularly challenging time for the industry," said Igotz Aubin, Insurance Europe's head of prudential regulation. "However, this survey has also revealed a number of serious issues that need to be acknowledged."
"While the industry shares the aims of Solvency II, policymakers must also appreciate the significant burden which its implementation is placing on insurers. EIOPA [the pan-EU regulator, European Insurance and Occupational Pensions Authority] and local supervisors should, therefore, avoid imposing last minute requirements and interpretation which add to that obligation," he said.
One of the biggest challenges insurers raised in their responses was the compliance burden associated with the approximately 700 guidelines issued by EIOPA, often on its own initiative. Most national supervisors have committed to fully comply with these guidelines. Taken together, these guidelines add around 1,100 pages to Solvency II, with an accompanying significant increase in compliance burdens.
Many insurers also reported that member states were "gold plating" the new regime during the process of implementing it into their national laws, giving those based in or operating in that particular territory more work to do. They were also concerned about the volume of items requiring approval from national regulators at a time when resources were already stretched, such as firms' own internal compliance models.
The Solvency II regime sets out broader risk management requirements for European insurers and dictates how much capital firms must hold in relation to their liabilities. Smaller firms are expected to use a standard model when calculating capital requirements; however firms are permitted to develop their own 'internal model' for this calculation appropriate to their risks and liabilities. Internal models must be submitted to the insurer's home regulator for approval. "Almost all" respondents to the Insurance Europe survey said that their regulators' requirements during the approval process were too burdensome, and were delaying approvals.
Many respondents were also concerned that the European Commission is not due to adopt the final version of the quantitative reporting templates (QRTs), which insurers need to comply with disclosure requirements under the third pillar of Solvency II, until next month; just four months before the new rules take effect, Insurance Europe said.