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The progress of Solvency II (the European directive on the taking-up and pursuit of business in insurance and reinsurance) took a significant step forward this week with the publication of the formal parliamentary report by Peter Skinner, the Solvency II rapporteur (the person responsible for steering the directive through European parliamentary procedures), including the latest proposed amendments to Solvency II.
A total of 67 amendments are proposed in the report, many of them on legislative procedure. However key amendments include:
- The adoption of a “compact approach” to the definition and calculation of minimum capital requirements
- A more flexible approach to “surplus funds” and what is included in capital requirements
- Insertion of the requirement to measure risk and well as monitor and manage it.
- Support of the home/host approach to regulatory supervision where a lead supervisor, that in the regulated organisation’s home member state, sets the capital requirements across the EU and itself liaises (including sharing all information) with the supervisors in those member states where the regulated organisation has subsidiary operations.
This last provision has caused an amount of concern in smaller EU member states as they see themselves being excluded from the supervisory process, but is considered essential by the European Commission, and the regulated companies, if they are to avoid having to comply with inspection by up to 27 different regulatory supervisors. The role of CEIOPS (the Committee of European Insurance and Occupational Pensions Supervisors) is strengthened in the report giving it responsibility for umpiring any disputes between member state supervisors and for regularly reporting to the European Parliament.
Commenting on the report, Peter Vipond, Director of Financial Regulation and Taxation at the Association of British Insurers said: "It is an innovative report which supports the Directive’s risk-based approach. It sets the tone for the way the Directive will be voted on in Parliament. Mr Skinner has also made some sensible suggestions to strengthen co-operation and mutual trust between regulators. However, there are still areas of further development to be worked on. We hope to see the Framework Directive agreed by the end of this year."
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