Enter to open, tab to navigate, enter to select
CEIOPS releases the third wave of advice on Solvency II implementing measures
Practical Law UK Legal Update 1-500-7350 (Approx. 2 pages)
CEIOPS releases the third wave of advice on Solvency II implementing measures
by Laura Hodgson, Norton Rose LLP
| Published on 12 Nov 2009 |
This article is part of the PLC Global Finance October e-mail update for the United Kingdom.
Speedread
The Solvency II Directive, which will radically modernise the prudential regulation of insurers and reinsurers in Europe, is due to be implemented by 31 October 2012. The European Commission requested that CEIOPS provide it with fully consulted-upon advice on Level 2 implementing measures (containing much of the detail of the new regime) by January 2010. So far, CEIOPS has received feedback from two 'waves' of advice (one in March, followed by a second wave in July) and has now sent out a third wave of advice for consultation.
The Solvency II Directive, which will radically modernise the prudential regulation of insurers and reinsurers in Europe, is due to be implemented by 31 October 2012. The final form of the Framework Directive was agreed on 22 April 2009. However, much of the detail of how insurers will be expected to organise their businesses will be set out within the various Level 2 implementing measures (the Directive will follow the levels of the Lamfalussy process).
The new solvency regime will be risk-based and requires all insurers to calculate their capital requirements in relation to the risks that impact their business. Insurers will have to satisfy a minimum capital requirement (MCR) and to run their business in such a way as to satisfy a higher risk-based capital requirement - the solvency capital requirement (SCR). Breach of the MCR will trigger an automatic loss of the insurer's licence, whereas breach of the SCR will be likely to trigger regulatory intervention.
Insurance groups will be required to calculate a group solvency capital requirement in addition to the 'solo' capital required for each group member. Insurers and reinsurers must be able to demonstrate that they have adequate governance arrangements in place, including risk management, actuarial and compliance functions.
CEIOPS (Committee of European Insurance and Occupational Pension Supervisors) is the supervisory body tasked with drafting advice to the European Commission on the content of the detailed provisions of the new regime. The Commission has requested that CEIOPS provides it with fully consulted-upon advice on Level 2 implementing measures by January 2010. So far, CEIOPS has received feedback from two 'waves' of advice (the first wave was released in March, followed by a second wave in July).
CEIOPS has now sent out a third wave of advice for consultation. CEIOPS is inviting comments on its draft advice until 11 December 2009. In particular, CEIOPS is seeking input from stakeholders in relation to the calibration of the SCR formula and MCR as well as simplifications regarding the calculation of technical provisions and the SCR formula and the partial internal model.