04 July 2013

Insurance Insight: Solvency II interim rules could worsen market fragmentation

This was the finding of a survey by ICODA European Affairs. Among the surveyed Member States, close to 40 per cent admitted that their national supervisory authorities lack the competences to implement guidelines for Forward Looking Assessment on the undertaking's Own Risk and nearly 50 per cent do so for Pre-application for Internal Model guidelines.

Of the 13 Member States that replied, the responses indicated the following conclusions: 100 per cent of the responding Member States prefer a second quick fix Directive delaying full Solvency II implementation to 2015-2017; most respondents indicated to rather wait until there is clarity on the timeline of Solvency II i.e. until the Omnibus II proposal is finalised, before implementing full Solvency II;

Almost 80 per cent of the responding Member States indicated that they would have no difficulties in applying the interim measures concerning the Guidelines on System of Governance; the percentage dropped to 75 per cent regarding the Guidelines on Submission of Information; 63 per cent regarding the Guidelines on Forward-looking Assessment (based on ORSA principles); and only half regarding the Guidelines on Pre-application for Internal Models.

Commenting on the study, Mark Meyer who conducted the survey under the guidance of Lieve Lowet, partner of ICODA European Affairs, said: "The survey showed that the intention to comply (willingness) is larger, than the ability (operational readiness) to comply, in turn again larger than the (legal) competence to comply; 63 per cent of the responding Member States (8) indicated the intention to change legislation to provide their NSAs with competences when lacking, but as they see fit."

"This underlines that the interim measures, although intending to reduce market fragmentation, may only partially reach their goal. To safeguard the maximum harmonisation nature of Solvency II, policymakers may want to strive for the finalisation of Omnibus II."

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