Reflecting the latest developments in prudential supervision, actuarial science and risk management, and to allow for updates in the future, the European Parliament and Council of the European Union yesterday adopted a “directive1,” setting new solvency rules—the "Solvency II" directive—for insurance companies.
The directive, the groups say, is aimed at strengthening the supervision of insurance companies and prudential regulation, because that existing solvency rules are well out of date.
It also establishes a new framework for EU regulation through the recasting of 14 existing insurance directives into a single legal text.
The new rules are intended to:
• Increase the integration of the EU insurance market
• Strengthen protection of policyholders and beneficiaries
• Enhance the competitiveness of EU insurers and re-insurers
• Encourage improved legislation in this sector
Adoption by the Council follows an agreement reached with the European Parliament at first reading under the co-decision procedure.
After intense negotiations, in the first part of 2009, the European Parliament and Council have reached agreement on the Solvency II Directive, notes Towers Perrin, a risk management consultancy. There is now no reason to expect any delay in the target implementation date of October 2012, notes the firm.
“Solvency II represents both a challenge and an opportunity for European insurers,” notes a briefing on the Towers Perrin Web site. “However, the greatest benefits will be achieved by those firms that position themselves early to take advantage of the coming regulatory change.”
With the Level 1 Directive text now finalized, the focus has shifted to Level 2 Advice, notes the risk management firm. The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) is currently in the process of publishing three waves of advice on various topics, including calculation of technical provisions, calibration of the standard formula for the solvency capital requirement (SCR), and further details on the requirements for internal model approval.
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