Andrew Tyrie MP (Chairman of the Treasury Committee) recently described Solvency II as “an object lesson in how not to make law”. In similar vein, Andrew Bailey of the PRA has said that Solvency II is “lost in detail” and “vastly expensive”.
Draft Guidelines issued by EIOPA in March aim to restore credibility to the Solvency II project and to reassure firms that vast sums spent by them in preparing for the new regime have not been wasted. However the introduction of compulsory reporting and ORSA requirements while Pillar 1 negotiations remain unresolved is controversial. Because the Guidelines have no legal force, there is also a danger that they will fail to secure a “consistent and convergent approach” to preparation for Solvency II. The Guidelines are open for consultation until 19 June.
Our briefing, which can be found here, examines:
- Whether guidance introducing elements of the Solvency II Directive represents legitimate preparation for the new regime or implementation by the back-door;
- Firms’ exposure to different levels of compliance by national regulators with the Guidelines; and
- The implications for firms of recent PRA statements about where Solvency II negotiations are headed, including its 23 May updateon the European timetable and its approach to implementation.
Clearly, the Guidelines are intended to underline that Solvency II is back on track. In reality, only final agreement on the remaining issues and a properly planned timetable for bringing the Directive into full force can achieve this. Until then, doubt must remain about the final shape of the new regime. Indeed, despite confidence expressed by Andrew Bailey that it is “politically highly unlikely that the EU will operate long term without harmonised standards for insurance”, it does still remain questionable whether there will ever be a new regime at all.
Please click here for our briefing which examines these issues in more detail.