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On Tuesday, Charlie McCreevy, the European Commissioner for Internal Market and Services, told the FSA’s Annual Insurance Sector Conference that Solvency II had to have regulators with cross-border information sources – although it was the local regulator that had the ultimate say in whether an insurance company contiunued to trade in their jurisdiction.
McCreevy told the audience, “We need to agree on group supervision and the group support regime. It is widely acknowledged that the way that groups are supervised at the moment is not adequate. International groups transcend national borders – how can they therefore be supervised by regulators who are confined within national borders?”
Solvency II will bring about a complete change to the prudential regulation of insurance and reinsurance, said McCreevy, but the impact will vary between countries. The UK has an advantage in that it already has a risk-based capital requirement, ICAS, similar to Solvency II. However the UK still has plenty to do regarding implementation.
A major implementation issue remains the role of the group supervisor, responsible for coordinating the supervision of the group across the many borders and ensuring information flows between all supervisors. But, said McCreevy, this should not be seen as taking power away from local supervisors who will retain control over local Minimum Capital Requirement, the key that triggers ultimate supervisory action – the closing down of an undertaking.
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