Wednesday, 26 March 2014

Solvency II Delegated Acts available online (kind of...), plus EIOPA's plans for 2014/15

So let's start with something a bit unexpected - DRAFT DELEGATED ACTS! ONLINE!

I'm not sure who the leaky uploader is (appears to be a Spanish consultancy firm), but the document is very much online. Sadly, it is only the January 2014 version, which as you will see in the rest of the post, has just been superseded, but it definitely pairs up with the version currently doing the rounds, I promise!

I have managed to get a sneak preview of the latest version of this document (dated 14th March) which have seemingly managed to burst the banks of the tightly-knit circle of advisors, and are now no doubt winging their way to a Solvency II Programme Director near you! There are "tracked changes" on the March document now circulating, which only appears to cover changes since the emergence of the January document hyperlinked above.

Lord help anyone who wants to trace it back to the more familiar 2011 (unpublished) draft, you might as well draw a load of foxheads on sticks...

Insurance Europe were obviously part of the privileged few for the March revisions, hence they fired out this missive last week regarding all of the Pillar 1 technical areas which they feel (on behalf of the industry) remain deficient. There are no real surprises in their list - it is the same topics which have been on the whinge-list since EIOPA's LTGA last year, and indeed earlier in the case of the Currency Risk approach and Own Funds classification.

Following on from the draft Delegated Acts being made more widely available, there has been a reasonable amount of noise in the paid-for press (here, here and here for subscribers), as well as Insurance Europe's top man having a lobbying call published in the FT (here).

Being more of a Pillar 2 man myself, I thought I would check to see what, if anything, had been tweaked in my areas of interest. The impression given earlier this year was that little had changed outside of the Long-Term Guarantee elements, and that was certainly true if you compared the November 2011 and January 2014 documents.

However, having examined the amendments in the March 2014 version, I have found is that a few areas of governance (both SOG and Internal Model governance) which were previously untouched have actually received a fair bit of treatment, for example;
  • Changes to the requirements for internal audit function holders not to cover multiple control functions (this constraint has been removed). This is presumably to pacify the smaller firms across Europe who have a Risk/Compliance/Internal Audit multi-tasker, so textbook "three lines of defence" have taken a bath in the interests of proportionality.
  • The devil remains in the detail though, as the amended text allows someone to "carry out" more than the IA function, but seems to stop shy of them "taking responsibility" for other functions. Not sure how that will work in practice.
  • Changes in the IM Validation space, in particular the removal of the requirement for a "Validation Policy". Fair to say most firms in IMAP would have produced one of these at least a year ago now (plenty of industry references here, here, here (p8) and here for example!), and while still a document of merit, does a "validation policy" now constitute gold-plating?
  • Changes in the required Internal Model Documentation, targeting a much slimmer set of compulsory documents. This includes replacing a number of "policies" with "descriptions of...", which will no doubt be well received by those supervisors with multiple internal models to assess over the next 18 months!
  • The tiered timescales for submitting QRTs, SFCRs and RSRs have now moved into the Directive, via Omnibus II text (as opposed to haveing been deleted, which is what it looks like at first glance!)
  • A few of the other TSIM articles (Tests and Standards for Internal Model Approval) have been enhanced. "At least quarterly..." assessment of the IMs coverage of material risks is now specified, for example. Quite how the hard-coding of the regularity cramps your actuaries' style is another thing! 
I strongly suggest you all get back to work and check for yourselves!

Plethora - EIOPA materials, not piñatas
In other news, the activity around Delegated Acts is nicely complimented by a plethora of information from EIOPA's Insurance and Reinsurance Stakeholder Group from their late-February meeting. Worthy of note;

Olav Jones presentation - Delegated Acts - Industry Key Outstanding Issues
  • 120+ "issues" have been listed by the Industry via the IRSG, covering methodologies, calibrations, errors and omissions.
  • "Industry" is prioritising this list as we speak, as a tacit acknowledgement that they can't have everything, given the timescales.
EIOPA on the first set of Implementing Technical Standards
  • A decent breakdown of how ITS are arrived at and approved/rejected by Commission
  • Detail on what elements of Solvency II are subject to the "approval process" covered by the first set of ITS, and why.
  • Interesting retro-reference to what an "internal model" is, which you might benefit from referring to your own documentation!
  • More precise calendar for the first ITS consultation at the back.
EIOPA on Solvency II Planning in 2014/2015
  • Detail their priorities as ITS, Guidelines and contributing to the Delegated Acts debate, in that order
  • Note that over 15% of guidelines under construction are not applicable on "day-one"!
  • Slides covering precisely what is being covered in the 4-tier release of ITS and Guidelines for consultation over the next 18 months or so
  • More precise calendar for the all 4 consultation periods at the back
EIOPA on the new, post-Lisbon world
  • All-rounder, covering distinctions between Delegated and Implementing Acts, and EIOPA's new suite of tools.
Really useful materials for the industry, which begs the eternal question as to why they aren't publicised better!


  1. very nice contribution man !

  2. Allan, do you happen to know approximately when the Delegated Acts will be finalised and made public?

  3. The best I have heard is either "summer" or "2nd Trimester" of this year. The document needs to be translated, which adds to the time more than the current squabbles around basis points and percentages!

    Commission timetable shows the "deuxieme trimestre" on p21 here

    Hope that helps,