The European Commission has published a revised draft of the Delegated Acts containing rules for the implementation of the incoming Solvency II directive.
The most significant change it makes relates to the capital charges under the standard formula for securitised assets, which lay down much lower figures as advised by the European Insurance and Occupational Pensions Authority.
The EC draft, published on October 10, stated that reductions in capital charges have only been considered where there is a clear quantitative case.
It said the proposed rules would also cover how to set the level of capital for asset classes an insurer might invest in, the valuation of assets and liabilities, how insurance companies should be managed and governed, and equivalence assessments of third-country solvency regimes.
The revision process aims to: streamline the way insurance groups are supervised; strengthen the powers of group supervisors; and take into consideration current developments in insurance, risk management and international reporting standards.
Janine Hawes, insurance regulatory leader at KPMG, explained that the revised rules were designed to better reflect the underlying risks, taking account of the seniority of the tranche and the quality of the underlying assets.
'For senior tranches, the charges are now more aligned to the charges that would apply were the underlying loans held directly,' she said.
'This move will help allay concerns that high capital charges could deter insurers from investing in longer-term investments, which is much needed to enable European growth and create jobs.'
Michaela Koller, director general of Insurance Europe, welcomed the publication of the Delegated Acts, adding that they 'are a vital part of the implementation of Solvency II'.
She said: 'We are now examining them, paying particular attention to their treatment of long-term investments which, as well as impacting policyholders, could impact insurers' abilities as the leading institutional investor to help fund European growth and provide market stability.'
This act will come into force once the European Parliament and Council have approved it, following their scrutiny, which can take up to six months.