Insurers urged to take part in the latest impact study for Solvency II

Feedback from the study will be crucial to the development of measures to implement the new regime. The organisers say they want at least 25% of the total number of European insurance and reinsurance undertakings, and 60% of European insurance groups, to participate.

Solvency rules protect policyholders' interests by requiring that insurers and reinsurers hold sufficient assets to meet their liabilities. Solvency II is the European Commission's project for implementing a new, harmonised solvency regime across the EU.  

Current EU solvency rules require insurers to hold capital against their insurance risks. Under the new system, insurers' capital requirements will also have to take into account market risks (such as a fall in the value of their investments), operational risks (malpractice or system failure) and credit risks (such as a default on a large debt).

This means that insurers will need to take a much more active role in evaluating their own risk profiles, managing those risks effectively and assessing their own capital needs.

The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS), has been carrying out large-scale quantitative impact studies on the proposals to assess their practicability. The latest of these, Quantitative Impact Study 4 (QIS4), will run from April to July 2008. CEIOPs will report on the results in November 2008.

Further advice

CEIOPS has also been asked to advise the European Commission by May 2008 on the practical application of the group solvency regime proposed under Solvency II.

Currently, insurance groups in the EU are treated as a collection of separate entities, each supervised individually and locally. Solvency II will streamline the system by introducing a dedicated group supervisor in the group's "home" member state who will be responsible for monitoring the group as a whole.

Also due in May is CEIOPS' advice on proportionality and how Solvency II will affect small and medium-sized insurers. There has been some concern that the new regime will place too great an administrative burden on such firms. 

Timetable

The Commission wants Solvency II to be in operation by the end of 2012. It is hoping that its Framework Directive can be adopted by the Council and the European Parliament by the end of 2008.

Implementing measures ("Level 2") are due to be published in the first half of 2010, with a view to these being adopted by the second half of 2010. Supervisory guidance ("Level 3") should be completed at the same time.