14 January 2013

Risk.net: Lawyers question EIOPA's powers to soft-launch Solvency II

Legal experts are divided over whether the European Insurance and Occupational Pensions Authority (EIOPA) is overstepping its powers in trying to compel national supervisors to adopt early elements of Solvency II prior to the entire package coming into force.

Last month, EIOPA published an opinion laying out a roadmap for the soft launch of the Directive's Pillar II requirements on risk governance and the Own Risk and Solvency Assessment (ORSA) in order to ensure a convergent approach between national supervisors in the run-up to the implementation of Solvency II.

The authority will publish guidelines for their implementation in the first half of 2013 and expects national supervisors to comply from January 1, 2014 - despite the expected two-year delay to the full implementation of the Directive.

Lawyers have questioned whether EIOPA has legal powers to make national regulators comply with these guidelines. While EIOPA has the ability to issue guidelines, it does not have to power to change the law of individual jurisdictions to enforce compliance, some legal experts say.

Bob Haken, London-based partner in the insurance group at law firm Norton Rose, says only those supervisors that have delegated powers from their national government to enforce regulations would be compelled to comply with EIOPA. Other lawyers argue that because EIOPA's powers are not tied to the Solvency II legislation, it has the legal power to demand national supervisors implement Pillar II, even without the full implementation of the Directive.

There is also some confusion over whether EIOPA is going against the European Commission's (EC) wishes by taking steps to soft-launch Pillar II.

Insurers doubt whether any new guidelines from EIOPA will ensure a harmonised soft-launch of Pillar II, regardless of the legal particulars. "I'm not sure it's going to be enough to get the consistency they're striving for, partly because, if you just look at all of the difficulties in getting agreement on key aspects of Solvency II, that sort of dynamic is still alive when it comes to early adoption as well", says Tom Grondin, chief risk officer at Aegon in The Hague.

There are indications EIOPA may include elements of the Pillar III reporting regime in the forthcoming guidelines. EIOPA states that "national competent authorities are encouraged to request all the information necessary for applying a prospective and risk-based supervisory approach".

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