Solvency II

Solvency II, the planned overhaul of prudential regulation for European insurers is well under way. Existing European solvency rules for life, non-life and reinsurers will be significantly upgraded. Structured around three pillars, Solvency II is a risk-based, forward-looking regulatory regime founded on a ‘total balance sheet’ and market-consistent approach. Companies will be given incentives to run their business with an increased focus on risk management, governance and enhanced disclosure.

The European Commission published a revised draft proposal for a Framework Directive on 26 February 2008. It was finally adopted, after intense negotiations, by the European Parliament on 22nd April 2009. The EcoFIN Council, co-legislator with the Parliament, is expected to formalise its adoption in early May. The directive will become EU law once published in the Official Journal.

Mark Batten, partner, PricewaterhouseCoopers LLP, says...

"With the framework directive soon to be in place, any doubts about implementation have been dispelled. We will now move swiftly onto the detailed requirements of Level 2 and 3. The devil will inevitably be in these details and companies need to follow the work of CEIOPS in this area closely, and contribute where appropriate, to make sure that their implementation plans stay on track. Concerns about a delay in the timetable have proved unfounded with the tight 2012 deadline still in place.

“Robust plans need to be established as soon as practical to meet this deadline and these plans also need to be sufficiently flexible to anticipate and adjust for the detailed measures to follow. There is still a good deal of work remaining, including another QIS exercise, probably next year. But the good news is we now have a clear framework and a clear path to the finishing line."
Adoption of the Level 1 Framework Directive paves the way for substantial further work by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) in preparing the associated ‘Level 2’ implementing measures. CEIOPS’ more recent quantitative impact studies (QIS) have informed this process: the results of the latest QIS, the fourth, were published in November 2008.  On 26 March 2009, CEIOPS published its 'first wave' of consultation papers on Level 2 measures: another more substantive, second wave was published on the 2nd of July, with a third and final wave due towards the end of the year.  The Commission has announced its intention to conduct a fifth QIS from April to June 2010.

In response to the 'first wave', our subject matter professionals have reviewed the consultation papers and provided comment on how the advice might work in practice, what we think will work well and areas in need of clarification. This gives you insight into how Solvency II will impact the industry.

The deadline for responses to the second wave was the 11 September and PricewaterhouseCoopers provided comment to CEIOPS on each CP to help shape the Directive. Check the 'updates' section to review our responses to CEIOPS and short papers from PricewaterhouseCoopers on the latest CPs and key topics - for example, a summary of the 'second wave' CPs issued and an exploration of internal model approval.

The timeline to achieve full compliance by 2012 remains tight. Companies would be wise to press ahead with initiatives designed to ensure robust plans are in place to meet the deadline as the new rules bring significant change. A well planned approach could provide optimal capital, organisational and structural solutions.

If the Framework Directive is adopted as planned, we anticipate that the implementing measures should be finalised in 2010. The proposed implementation date is 1 November 2010.

April – June 2008
November 2008
2009
October 2009
2010
2012		 Fourth Quantitative Impact Study (QIS4)
QIS 4 results
Adoption of the Directive by the European Parliament and the Council
CEIOPS advice on implementing measures
Adoption of the implementing measures
Transposition of the Directive
PricewaterhouseCoopers is at the forefront of the current debates and has a multi jurisdictional team of professionals who are available to assist you with every aspect of your preparations for Solvency II.