The European Insurance and Occupational Pension Authority could implement elements of a new regulatory system for Europes insurance industry early, even if final Solvency II rules are not introduced until 2016.
Speaking in Frankfurt today, EIOPA chair Gabriel Bernardino said an 'interim phase' of implementation for rules relating to governance, risk management and the transparency of insurers could help to 'keep the momentum' behind the Solvency II project.
Last month, Bernardino wrote to the European Commissioner responsible for the insurance industry to raise his concerns over 'stagnant' political negotiations aimed at finalising the legislation underpinning Solvency II, the Omnibus II Directive. Solvency II, which places new capital requirements on insurers, was expected to apply from January 2014, but there are major doubts over whether this deadline will be met.
Bernardino today repeated his call for a 'strong commitment' from European Union political institutions towards implementing the rules. 'This should prompt the definition of a clear and credible timetable based on a realistic assessment of the expected time needed to deliver the different milestones of the regime.'
He acknowledged this could lead to an implementation date of 2016 or later, but said EIOPA was 'exploring the possibility' of implementing aspects of two of the three 'pillars' of Solvency II before then. In particular, he referred to Pillar 2, which sets out governance, risk management and supervision requirements, and Pillar 3, which relates to disclosure and transparency.
'Even if a credible timetable will probably point to an implementation date not earlier than 2016, it should be possible in an interim phase to start to incorporate in the supervisory process some of the key features of Solvency II, namely some elements related to Pillars 2 and 3.
'EIOPA is exploring this possibility, based on its powers under the EIOPA Regulation. This interim phase should be coordinated by EIOPA in order to ensure a consistent application throughout the EU.'
Bernardino noted that the current uncertainty over when Solvency II would be introduced was 'challenging the EU credibility' in discussions aimed at persuading other countries to also adopt similar rules.
Recent delays to key European Parliament votes on Omnibus II were linked to a decision to carry out a new impact study exploring the impact Solvency II might have on the long-term guarantees offered by insurers.
Bernardino stressed the importance of agreeing a 'sound and prudent' regime for valuing these guarantees and said EIOPA hoped to achieve a 'clear mandate' from the EU political institutions to begin the impact assessment 'as soon as possible'.
Colin Murray of Towers Watson said delays to Solvency II were causing 'understandable frustration' to insurers and welcomed Bernardino's suggestion of an interim implementation phase.
'Insurers are responding by integrating Solvency II activities into business-as-usual activities,' he explained. 'Nevertheless the Solvency II development process has brought many significant advances in measurement and managing of risk and it is important that these developments are not lost. 'Areas such as the development of Pillar II activities (such as the Own Risk and Solvency Assessment) require significant work and it is unlikely that this work will ever be wasted. We welcome EIOPA's efforts to introduce an interim phase to ensure that the momentum continues and that the advances achieved to date are not lost.'