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Can you explain what the interim Solvency II measures, sometimes known as Solvency 1.5, encompass?
Perhaps I should start with a disclaimer: I think the name Solvency 1.5 is unfortunate. We are not building from Solvency I, we are preparing for Risk Based Supervision. EIOPA will issue Guidelines addressed to national supervisors on how to proceed in the interim phase leading up to Solvency II. These Guidelines will cover the system of governance, including risk management system and a forward looking assessment of the undertaking's own risks (based on the ORSA principles), pre-application of internal models, and reporting to supervisors. For more information you may wish to consult the EIOPA Opinion on interim measures regarding Solvency II.
Does the proposal have acceptance among EU country supervisors? Will everyone move forward together?
The above-mentioned Opinion of EIOPA was first welcomed, and then approved by the EIOPA Board of Supervisors, which consists of the national supervisory authorities of the EU Member States. EIOPA expects that all our Board of Supervisors members are committed to set the grounds to develop a consistent and convergent supervisory approach with respect to the preparation of Solvency II. EIOPA's Guidelines will ensure that important aspects of the new regime will be phased-in, taking into account due proportionality. However, by nature these Interim Guidelines are soft regulation (i.e. used on a so-called "comply or explain basis"), so there will be no sanctions if some National Supervisory Authorities (NSAs) do not fully comply with the Guidelines at this stage
There’s been a lot of uncertainty around the implementation date of Solvency II. Realistically, when will the project be completed?
Let’s start with what matters most: Solvency II will be implemented, and there should be no doubts about it. On the application date, we are confident that the framework will be applicable in 2016 though I cannot give you 100 per cent reassurance because the decision is not made at the EIOPA level. The decision has to be made by agreement between the European Council, European Parliament and the European Commission.
I can confirm that EIOPA will do the necessary work to make the implementation of Solvency II happen on January 2016. But let’s be clear, once we settle the pending issue of Long Term Guarantees, parties must avoid the temptation of reopening more issues. Solvency II is a good framework, it will not be perfect on day 1, but this should not be an obstacle to start.
There is a growing view that Solvency II will lead to restructuring in the re/insurance industry with M&A and consolidation to follow. Do you agree this could be an unintended consequence?
I have been hearing this for the last 15 years and also often asked this question at conferences by representatives of smaller companies. And I used to give such an example: I like to buy books and I buy my books in a tiny bookshop in Madrid.
The owner reads a lot and he knows what the customer likes and always gives me great recommendations. I could buy my books at Barnes & Noble or at Amazon. But as long as I get such a level of service [from my little bookshop] I will never do that.