02 July 2007

CEIOPS interim report on supervisory convergence

CEIOPS published its 'Interim Progress Report on Supervisory Convergence in the Field of Insurance and Occupational Pensions for the Financial Services Committee'. The interim report also includes a summary of stakeholders' replies to CEIOPS assessment questionnaire, and CEIOPS convergence committee's terms of reference in its annexes

The report notes that the most effective means for improving convergence of harmonized supervisory practices would be EU legislation based on clear principles, supported by EU-wide supervisory measures. “The current low level of harmonization of the EU regulatory framework represents one of the most fundamental challenges to increased supervisory convergence.”

With regard to accounting issues, CEIOPS notes that the problems created by the differing and sometimes limited scope of application of IAS/IFRS to insurance undertakings in several Member States, are insurmountable until their cause is resolved. It has not been possible for CEIOPS to achieve standardisation of this specific supervisory reporting before the definition of the whole Solvency II project, and of an international accounting framework.

“The IORP Directive and the IMD may redress the imbalance of the lack of harmonization in their regimes”, the report notes. These directives “leave considerable scope for differences at national level, as well as for national discretion.”

The restraints of the current regulatory framework stay apparent in the supervision of insurance groups. As long as the IGD is based on the s.c. “solo-plus” approach, supervision will focus on the individual company.

CEIOPS considers more shared levels of powers, objectives and resources of competent authorities, is another pre-condition for full supervisory convergence.

In any case national supervision needs to consider legitimate market differences and the limits to convergence, which extends beyond the remit of supervisors, such as taxation.

Overcoming these challenges will also be subject to smoothing - at a higher EU level - of the divergences which arise from solutions adopted through the political process.

Ceips report

© Graham Bishop