KPMG has warned that the implementation of Solvency II is likely to be further delayed after a key European Parliament session to approve proposed amendments to the regulations was put back until next year.
Responding to the announcement, KPMG said that this meant there was 'no clarity' about when the regulations, which will place new capital requirements on insurers based on the results of risk-based assessments of their assets and liabilities, will be introduced. Previous speculation around the implementation date was predicated on Omnibus 2 being finalised this year. Now it has been formally recognised that this will be missed, the further risk of a significant delay increases greatly, KPMG's European head of Solvency II Peter Ott said.
'Today's announcement indicates that the trilogue process to agree the proposed amendments to Solvency II is taking longer than had been hoped. 'It needs to be recognised that there will be no single universally accepted solution to the long-term guarantee issue and political compromise must be reached quickly if Solvency II is ever to be finalised.'
Janine Hawes, insurance director at KPMG in the UK, added that the Guidelines on Preparing for Solvency II, issued by the European Insurance and Occupational Pensions Authority in draft in March, had effectively become a 'soft launch' of Solvency II.
She added that there was now a need to delay the 'switch-off' of existing regulations, which is scheduled to happen on January 1 next year.
The announcement of the delay to the European Parliament session comes on the same day that a survey by Towers Watson revealed UK life insurers had used delays to Solvency II to make improvements to how they assess and measure risk in their own models.
In its annual study of risk calibration methodologies, covering 21 of the UK's life insurers that employ internal models, the consultancy found that most companies rated their risk validation as 'final' or 'almost final'.
This is in contrast to the result of last year's poll, which indicated firms had used the time ahead of the new European regulations to refine their own schemes.
Although many firms have reduced their work on Solvency II projects for the time being, Towers Watson said it still loomed large in their thoughts.
Global head of life capital modelling John Rowland said: 'After a period of months where it has sometimes seemed as if Solvency II has slipped off the agenda, we expect to see a refocusing of resources as internal model approval processes start.
'Despite benefiting from the hiatus, some key areas of model validation remain to be resolved in many life companies.'