"Dear Deidre" - Cross border insurance flogging under General Good provisions

One for giggles more than anything else. The other day I spotted a response from Lord Hill, the esteemed EC Commissioner for Financial Stability, to a question arising from Deidre Clune, a relatively new Irish member of the European Parliament.

Good question, wrong Deidre...

Specifically, the question related to a Maltese-licenced insurer which hit the skids back in 2014, with the CBoI's summary information here. It seemingly only wrote business in Ireland (hence I suspect it was cheekily named after Ireland's TV sports channel to aid sales!), and therefore left every White Van Man/Woman without cover, until Ireland's Insurance Compensation Fund stepped in.

A few things stood out about this exchange;

• The then prospective MEP used the incident as political currency in the election campaign - "Vote me in, and I'll personally fix the EU insurance industry...", she almost said!
• That Ireland, the log-term epicentre of EU cross-border distribution and birthplace of Quinn (which almost turned over the UK White-Vanners back in 2010), would have the brass to nibble at the hand that feeds it! Only 3 months ago, the CBoI's Sylvia Cronin was warning of a likely "...increase in cross-border activity", and at the same time EIOPA's Sr. Bernadino left a not-too-subtle hint that "In the specific case of the Irish insurance market, special attention needs to be devoted to the fulfilment of the general good provisions of host countries by the companies selling cross-border."
• That it took 6 months to get an answer to Deidre's very basic question (at least according to her first public mention of a response in this media article). It took an extra two months for that answer to be published formally.
• That in that article she was reported to believe that the measures spelled out by Lord Hill were to "...prevent this from happening again" (as opposed to enhance policyholder protection while facilitating orderly failures when they occur, etc etc). To be clear though, that is quoting the article, not the member!

Does anyone think that now, even after EIOPA's efforts to-date, that supervisory colleges will be effective enough to prevent these kind of events, or do we just buy local and hope for the best?

Delegated Acts in the clear - like we ever doubted it...

The last attempt to delay the inevitable has finally run its course - the Green Party-led resolution to throw the Delegated Acts back onto the 'to-do' list was given a thorough shoeing yesterday at the EU Parliament's Plenaty session, with the 189 votes in support slightly outweighed by the 512 against it (p9 here). I haven't seen Greens get wiped off the table that aggressively since I tried to feed runner beans to my toddler...

The news was gently broken by Catherine Stihler, the new rapporteur, yesterday - refreshingly, the parliamentarians were focused on the impact of policyholder security, rather than how beholden they should be to EIOPA's mathematics, and after their back street horror-show of a website upgrade this week, perhaps the less we rely on their efforts the better!

For some UK-specific giggles, you will be delighted to know that the ex-City boy gin magnet Nigel Farage and his UKIP government-in-waiting all voted with the Green Party on this matter (p68 here).

I won't bore myself with the legislative procedure from this point, but given ECON, and now Parliament as a whole, don't have a problem with the Delegated Acts as they stand (and the three month whingeing period expires on January 9th 2015), we can all go back to work...

Solvency II Delegated Acts - Grinched by EU Parliament?

Short and sweet - the expected promenade facile of the Delegated Acts through the EU Parliament and EU Council, which looked certain up to a few days ago (p16 here and here), has apparently come to a shuddering halt due to the intervention of Parliament.

Grinch - coincidentally Green?

This document published on the Parliament's website today appears to have made the timeline-followers worst nightmares come true, namely that an additional 3 months of delay on the Delegated Act sign-off may prevent some of the "...from 1st April 2015" approvals from being written into law by, well, the 1st April 2015!

As yet I have seen or heard nothing on the matter in the mainstream media, but given how annoyed Sven Giegold appeared to be when the Acts were tabled, it shouldn't be too much of a surprise that some flabby parliamentary procedure exists that allows for the (presumably positive) opinion of ECON to be overriden when it came to clearing the document through Parliament's main hall.

Naturally, Herr Giegold's name is on the front cover of the motion, but I can't seem to establish whether an additional 3 month delay is a fait accompli, given my lack of knowledge on Parliamentary procedure. I believe the Greens alone certainly constitute "...a political group or at least 40 Members", so they certainly have enough bulk to put this on the table at next week's Plenary (Wednesday by the looks of it), but I imagine having enough pals to table this resolution is not the same as having enough to pass it!

More to follow I hope, given how sparsely populated my legislative contact book is...

Solvency II Delegated Acts - whenever, wherever...

No sign of the Solvency II Delegated Acts sign-off as yet. The mighty ECON committee of the European Parliament have just about got their feet under the table after May's elections (and June, July and August's European summer holidays!), but despite meeting on the 3rd and 4th Sept, they don't appear to have discussed or even listed the matter as work in progress.

Wouldn't have felt such a big deal, given Gideon's summary on the topic back in early August, but the Mr Claffey and Co. at Milliman appear to have picked up on a potential sore point for the unit-linked boys, which might jack-up the Operational Risk SCR for anyone in standard formula world (which would cover a good number of pure unit-linked businesses I expect).

I've had a look around for the July version of the Delegated Acts, but they have yet to be leaked* as publicly as the January version - I would recommend anyone in the unit linked world gives this a once over, particularly if you still pay fat commission cheques!





* How about I shut my mouth - not only has the wonderful Petter Svensson (Sweden's foremost independent consultant) made it available on his own site, the Romanian Regulator has done similarly. Fill your boots...

Omnibus II Plenary Passage finally complete - sealed with a sneeze...

I'll keep this post petite et doux, just like myself - Omnibus II was passed through the EU Parliamentary Plenary vote today by 560 votes to 113 against (11.18am on the scrollable text on BBC). Never in doubt...

While Burkhard Balz was naturally exultant in his victory speech, there should be little surprise that the opposition to the amended text was skippered by Sven Giegold, who continues to hold the line that the industry and member-state lobbyists have gotten too-sweet a deal, and calling the resulting compromises "actuarially questionable" (at least that's what Google reckons "versicherungsmathematisch fragwürdig manipuliert" means!). If this is the Green Party line, it may make up the majority of the opposition number.

Emerging from the debate is also the rather unsubtle signalling of what the delegated acts should contain (proportionality in particular), an acknowledgement of the dire state of legislative practice in this instance, and even a few words on keeping technical standards out of Parliament's hemisphere from the Croatian contingent (welcome to the party!)

Herr Balz signed off with a promise to "concretize" proportionality within the acts (thanks again Google!), but not before reiterating that the changes compelled to insurers' capital bases by this version of Solvency II are "sicherlich kein Pappenstiel"...

Gesundheit!

Omnibus II preparations - quick note on the evasive ECON amendments

Just a quick weekend note before the Omnibus II-related fun starts for all us Solvency-II enthusiasts next week.

It didn't feel like much was doing this week on the run up, but then Practical Law published a note last night to say ECON had been tampering with the Omnibus II text. Bearing in mind there is at least one notable dissenter on the existing Omnibus II compromise within ECON, it would be nice to see exactly what ECON have tabled.


EU Transparency - just add oil

I have been onto the ECON site, and ferreted through the agendas and publications from their last few meetings, but have found nothing (for "amendments", I figured this was the most likely source, but I have come up with nothing).  I find the more you look for paperwork in EU institution websites, the less you find - as transparent as a tar-soaked binbag, and more's the pity.

One thing is for sure - the deadline for tabling amendments was lunchtime on Wednesday (item 1), so whatever was sent must have got there by then. We can also see that a "rule 142" special has been added to the Plenary agenda, presumably to help shoe-horn a vote through if the debate gets a little fractious.

That said, in IMD2 we have recently seen a piece of financial services legislation get bounced out of Plenary and back to trilogue regardless of the forthcoming Parliamentary elections. Will "rule 142" come to the rescue, or will we be kissing 2016 goodbye at lunchtime on Tuesday?

"Implementing Measures" to "Delegated Acts", "RTS" and "ITS" - Unsporting Lisbon...

How to make sense of post-
Lisbon legislative processes

OK, I have finally broken. I think it was a paragraph that had the words "acts" "delegated" "implementing" "regulatory" "measures" and "standards" strewn around like the gin-soaked occupants of a broken carousel that got to me.

The transition of Solvency II-relevant terminology from pre-Lisbon to post-Lisbon, and the lack of clear supporting material to aid the understanding of an idiot prole like me, has led me to have a stab at clarifying it myself, in the lead up to the Omnibus II vote in a couple of weeks.

The fundamentals are easy enough - the 2009 Treaty of Lisbon aimed to put Parliament and Council on an even keel in the decision making process, and get things done quicker. Lisbon was enacted around the same time that the original Solvency II Directive was coming in to land, so naturally any Lisbon-inspired changes in how EU legislation is made and maintained would need to be factored in to the wording of the Solvency II Directive when convenient.

Coupled with this was the European Union's decision (post-credit crunch) to develop a new architecture of financial supervision, which allowed EIOPA to rise in 2010 freshly armed from the embers of CEIOPS with new legislative drafting powers, changing the comfort blanket of the existing 4-level Lamfalussy process into something much trickier to fathom.

There was therefore plenty to factor in when Omnibus II, the tidying-up vehicle, was first envisaged  (covered nicely in this blast from the past from Freshfields), most prominently;

• EIOPA's ability to draft and recommend "technical" standards which could become law without Parliament and Council having a blocking vote - as CEIOPS, they would have only had an "advisory" capacity.
• The EU Parliament now being in a position to suggest that certain "technical" matters were actually "political", thus bringing some of the granular mathematics (specifically, Long Term Guarantee-related) back into their sphere of influence during the trilogues - without co-decision making, this would have been much trickier.

To supplement any confusion that might arise in the Lisbonising of the Solvency II Directive, there has been an opportunistic replacement, recycling or bastardisation of terms from pre-Lisbon over to the current day, without an effective mapping (this is by far the best offering I've seen, from Herbert Smith Freehills). Therefore for my own benefit, I have broken it down, and any benefit you can derive you are most welcome to!

Old Term - Implementing Measures (or "Level 2 Text")

New Term (part 1) - Delegated Acts

Why New - Comitology was the process of the Council and Parliament leaving Commission-led "committees" to deal with the development of secondary legislation to sit alongside core legislation (Solvency II Directive in our case). For years, Parliament was largely out of the loop of its drafting, receiving a Yes/No vote on such legislation only as late as 2006.

The post-Lisbon move from implementing measures to Delegated Acts gave Parliament the right to veto and amend drafts of secondary legislation. The European Council have the same powers. The delegated powers can also be revoked if either co-legislator doesn't like the Commission's tone.

The Commission, who remain responsible for developing Delegated Acts, have the drafting powers delegated, via article 290 of the TFEU. They continue to receive assistance from expert committees to create this material, with EGBIP assembled last summer to advise on the Delegated Acts side of things.

What does it really mean - not much on its own, however the new process is proving to be just as opaque and convoluted as it was previously (covered nicely here). It evidently means that influencing the content of Solvency II's Delegated Acts remains in the hands of a chosen few, for example, when Dr Wiedner noted (in AOB) that 'Member States' will get to see draft Delegated Acts before they are finalised in trimester 2 of this year, I think he meant the representatives in the room, not us!

This shadowy future was nicely predicted here back in 2011 - a less efficient process, less formality, less visibility of legislative influencers, and more horsetrading than bank holiday barbeque weekend at Tesco.

Old Term - Implementing Measures ("Level 2 Text")

New Term (part 2) - Implementing Acts

Why new - The concept of "Implementing Measures" has effectively been cut in half, with Implementing Acts very much a sideshow in the context of Solvency II - the Herbert Smith Freehills paper referenced above states that implementing acts are only referenced in one article of the Directive.

These are drafted by the Commission through powers delegated via article 291 of the TFEU, and the distinction between Delegated and Implementing Acts is shown here.

What does it really mean - nothing of consequence it would appear!

Old Term - N/A

New Term (part 3a) - Regulatory Technical Standards/RTS/

"Level 2.5"

Why New - EIOPA were empowered through the 2010 "EIOPA Legislation to draft technical standards on behalf of the Commission which would ensure consistent harmonisation of Solvency II across the Union. These kick in formally as soon as Omnibus II gets through.

A huge step up from their previous guise as CEIOPS, where they were little more than a sparsely staffed lobbying aggregator, Regulatory Technical Standards (RTS) are directly enforcable in Member State law once approved.

RTS may only be for technical matters and "shall not imply strategic decision or policy choices". These are published for public consultation, then submitted to the Commission, who can adopt, reject or amend them.

Both the Council and Parliament receive the draft RTS at the same time as the Commission, and have limited windows in which to object to their content. A specific "sunrise clause" has also been added to Omnibus II which allows the Commission (for a limited period) to circumvent the RTS process entirely and deal directly with certain matters without EIOPA involvement.

What does it really mean - For both RTS and ITS (below), EIOPA, as pen-holders, have had a significant amount of influence placed in their hands with respect to what "uniform conditions" are, and how they should be enforced.

As we have seen in recent consultations, EIOPA do not tend to change their minds, which may perversely make life easier (or at least more certain)!

Ultimately, the reality of "Level 2.5" is that the co-legislators have lost much of their ability to influence or veto acutely technical material, further distancing Solvency II's amendment and approval from Parliament and Council, into the hands of unelected, quasi-autonomous technocrats. Which can only be a good thing...

Old Term - N/A

New Term (part 3b) - Implementing Technical Standards/ITS/"Level 2.5" text

Why New - As with RTS, Implementing Technical Standards (ITS) are directly enforcable in Member State law once approved, and follow the same drafting process. EIOPA's scheduled work in the "Level 2.5" space is of course ITS, not RTS, in the run up to 2016.

Risk.net have tried to cover the distinction between RTS and ITS Standards here (subscription required), but it is not even massively clear from the Regulations which empower EIOPA!

The crucial difference is that ITS, once adopted by the Commission, receive no further scrutiny, unlike RTS, where the co-decision makers can still object after the Commission adopts.

What does it really mean - The reality of the legislative process means that even in the sticky-beaker's paradise of Solvency II, Parliament and Council do not have the time or inclination to argue the toss over this material, so will hopefully leave EIOPA and the Commission to it.


Hard to conclude this post really. For sure we have been unlucky to have bridged the Lisbon divide, as well as the genesis of EIOPA and the realisation midway through proceedings that some of the "technical" matters had immense political significance.

That said, the legislative path we have set Solvency II down for the last few years has made a mockery of the best laid preparation plans within the Union's insurers. Andrew Tyrie MP really hit the nail on the head...

Omnibus II and Delegated Acts - state of play summary (before it gets interesting!)

Unless you've been hiding in a cave since last summer, you shouldn't find anything new in this post, but I wanted to accumulate all relevant materials into one place for the run up to Omnibus II D-Day for my own convenience, and you're welcome to share.

At the moment we have;

European Parliament

• Omnibus II Plenary vote is still  scheduled for Tuesday March 11th. The Plenary page is here, but the forward agenda is not available, despite draft agendas apparently being due a month prior to Plenary meetings (suspicious?). There doesn't appear to have been any recent parliamentary agitation, from the steaming-mad Green contingent in particular, to suggests Omnibus II will get derailed at this point.

European Commission

• I'll cover the fineries of this on a separate post, but worth noting that the Commission's "draft implementing measures" document, which have been circulating for over 2 years, is now referred to as "Delegated Acts", after being Lisbonised.
• A revised draft of these rebadged Delegated Acts, on the assumption that Omnibus II gets through Plenary, will be delivered like an impatient baby in the deuxieme trimestre of this year (p21). 
• It apparently not be made available to the proles for public consumption beforehand (reported here and here). Still plenty of time for the faceless exponents of dark arts and back-room shenanighans to influence its content, so the lack of formal consultation is not necessarily a calendar breaker, though it is exceptionally poor form. 
• The Commission's advisers now come in the form of EGIBF (for Delegated Acts) and EIOPC (for Implementing Acts). EIOPC are evidently a garage without a car at the moment, having not published a scrap of material in 15 months while Omnibus II dragged its heels. 

EIOPA

• EIOPA's work on implementing technical standards is due to be released from April, in a phased manner.  I don't think that the activity is Omnibus II-dependent as such, even if EIOPA's influence is a little less formal without it!

Obviously as a practitioner in the Risk field who doesn't want to wallow in the details of European Union lexicon, the forthcoming spurt of activity is considerably murkier than it would have been pre-Lisbon. Virtually every relevant term or participating body in the Solvency II hemisphere has had a name or remit change in the interim, and I'm not seeing anyone offer a mapping between "Pre" and "Post"-Lisbon terms.

I'll have a stab on a separate post, for my own sanity if nothing else.

Omnibus II text released - first casualties emerging?

It was left to COREPER to announce that the Council and Parliament have agreed on the compromise text for Omnibus II, leaving the formality (!) of the Plenary vote on February 25th as the final hurdle before, well, the next set of hurdles. But here she is - 156 pages of over-masticated Eurobelch that has held the authors hostage for years like a slaphead in Rapunzel's spare room...

Omnibus II draftsmen - you're free to go

Chris Finney has already picked a couple of bones out of it, which look good for any EU multinationals with non-equivalent subs on the face of it. I'm not inclined to peel it apart on screen (I'm sure someone will do that for us in the next couple of days), but since the Commission's original proposal we do get;

• An enormous amount of preamble to factor in EIOPA's new role, which gets more elaborate with every paragraph,
• References to IAIS developments for future considerations on the equivalence front (will that be enough to cover the States and Canada long-term?)
• Some hard coding of references to "20% of market" for exemptions from reporting requirements,
• Visibility of the drop dates being proposed for EIOPA to deliver implementing and regulatory technical standards to the Commission - a reasonable amount are due in less than a year, including on model approval and "major" model changes.

As EIOPA will be penning all technical standards for the Commission, and relations between the two seemingly cordial, we might assume that EIOPA's views (which were almost immovable during the consultation on their preparatory guidance) will inevitably come to the fore in the final set of implementing measures.

Whatever comes of it, it would appear that the trilogue negotiations haven't quite done the job for the German contingent, with Hr. Hufeld from BaFin suggesting there are "5 to 10" insurers under his watch in danger of failure, a week after the German Government referred to a "balanced package" of help for their (seemingly) beleaguered industry which will be introduced in early 2014.

"Das Gleichgewicht wird zum Verlust..."

Omnibus II a done deal - Greens left feeling, errr, green?

So, having become bored with collapsing into their own tedium like a room-temperature flan, the Omnibus II negotiations reached an inevitably grim climax yesterday, with a deal bashed out to everyone's mutual distaste at the last possible minute - the basic details are here from the European Commission.  

Bearing in mind the volume of noise on the subject over the last 24 hours in particular, I figured I'd better pull a consolidation post together for my own benefit if nothing else!

The highlights are (apparently - no text released as yet);

1. Transitional measures extended for 16 years
2. Massive equivalence carve out (10 year "temporary" renewable facility)
3. Transposition date moved to end-March 2015
4. Matching adjustments and volatility adjustments more generous to the industry than recommended
5. The generosity of those adjustments countered by some qualitative measures around planning and disclosure.

Winners?

• Industry - Allianz's CFO rather boldly speaks on behalf of the entire European Insurance Industry, stating the deal is "...ambitious but acceptable". Prudential's CEO thinks it is "great progress" and "a good package", while Talanx "welcome the decision very much".
• Heavily indebted governments and companies - Burkhard Balz is happy to trumpet that "...we have also ensured that insurance companies will be able to continue to fulfil their role as long-term investors" through the lengthened transitionals and juicy adjustments. This will hopefully encourage insurers to splash some cash on long-term debt instruments and infrastructure projects where they may otherwise have stayed shorter-term.
• EIOPA - While they were happy to simply "welcome" the agreement, Sharon Bowles emphasises that "This marks the point at which Eiopa becomes fully fledged".
• Sharon Bowles - has surely enhanced her reputation by finally landing the most fraught European negotiation since the Abba reunion.
• Consultancies - will surely use the "tight timescale" routine to press gang the nation's NEDs and Execs into writing one more cheque.

Ambivalent?

• Insurance Europe didn't have much to say, other than acknowledging that the deal is not ideal, though provides a "workable base". They remain concerned about the "ambitious timetable".
• Groupe Consultatif also reinforce their continued support.
• The European Council apparently couldn't be bothered to send a big hitter to trumpet the big news, leaving it to one of the COREPER lads (well, an ambassador)!

Losers?

The Left - while it is no surprise that Sven and the Greens were left sulking (and doesn't the boy blog well!), the extent of his rancour, whether Party line or personal, doesn't augur well for when he and the ECON crew take it through Plenary, for example noting that the deal;

• "...[is a] flagrant violation of common market principles"
• "...[is a] grab bag of goodies"
• "...ignores the advice of the European Systemic Risk Board"
• "...resulted in the EP adopting a far more industry-friendly package in self-denial of the original mandate voted by ECON "

Perhaps most bitterly, he then promises to "...personally make sure that all companies making use of the agreed privileges will be named and shamed on a website including their brands and the billions of missing capital". 

You don't want to make the Greens angry now, do you...

Solvency II, 2016 and "Quick Fix 2" - Let the music play...

So despite my best baiting at the start of the summer, it has taken until this week for the big news regarding Solvency II to emerge, namely that, via Quick Fix 2, a layer of formality is likely to be given to the year 2016 as the "go-live" date by the European Commission, provided this draft Directive gets safe passage. Apparently, assurances were given by the co-legislators (p3) that this should be enough time to get it done.

Let's have a look at what exactly has been pushed out, and by whom;

Commission - statement from Michel Barnier
- "The Commission [on 2nd Oct] at my request put forward a draft Directive postponing the application date of the Solvency II Directive to 1 January 2016"
- Current trilogues are "progressing well" and an agreement between the co-legislators is "within reach", which seems to tally with Gideon's report from last week - the Council's "state of play" meeting is still scheduled for 15th October, which being prior to that last trilogue meeting, may help all parties.
- Mr Barnier "...has always wanted rapid application of Solvency II", in case anyone thought otherwise.
- EIOPA's LTGA report is an "excellent" one, in case anyone thought otherwise.
- Postponement done "...only after obtaining assurance from the Council and the Parliament that they would not further change this new application date of Solvency II"

Consultancies
- Apparently KPMG reckon that the industry is breathing "...a sigh of relief", while PwC reckon the date set is indicative that Omnibus II will be settled "...ahead of the Parliamentary elections in 2014". Deloitte's finest highlights that the extended transposition period (effectively doubled) will aid NCAs in giving permission to arbitrary things such as day-one model applications, USPs etc.

Lobbyists
- Insurance Europe don't like it! Still seen by them as an "ambitious timetable", which will lead to a "...significant increase in costs for the industry", which makes one think that the "sigh of relief" heard by KPMG was their own relief at securing two more years of advisory cash...

How much scope is there for something to go wrong now, given the benevolence/pragmatism of the Commission in granting this two year kick-on? Chris Finney covers that off here, most pointedly with the fact that a number of the co-legislator top-dogs giving their "assurances" may have gone to pastures new well before 2016.

PS Programme Managers and CFOs - Try not to laugh or cry at point 4 on the draft Directive document - "The proposal has no implication for the EU Budget".

Omnibus II Plenary delayed until March 2014 - 2016 out of the question?

Confirmation was provided today, if needed, that the Omnibus II Plenary vote was being pushed back into 2014 - that it needs until March 2014 perhaps underlines the swell of discord at the trilogue table, all of whom have seemingly been digesting EIOPA's long term guarantees report for, well, a long term...

Solvency II Spuds - hoofed

While July and August naturally died a death while the Eurocracy topped up their tans, any thoughts that compromise and camaraderie were on the various parties minds can now be unequivocally hoofed in the spuds, as can any notion of January 2014 being a meaningful date for anyone aside from EIOPA, its national satellites, and the 'soft launch' we have seemingly acquired.

A few of the Big 4's rather underemployed Solvency II experts have commented today on this latest delay and the rammifications, which contrasts against the optimism shown yesterday on Risk.net  by Insurance Europe in particular. I guess what is particularly disappointing is that the ITER listings haven't changed in respect of Omnibus II before and after the summer break (here and here), so why wasn't something said earlier?

I had already blogged on the shifting sands before the summer break, and the stance of BaFin in particular, and it would appear a market analyst sees the German approach (including an uncited reference of a desire for 20 year transitionals) as being a genuine show stopper, rather than a mere irritant.

That may be a touch dramatic, but by shifting the Plenary vote to March, when retiring/deselected MEPs will be on autopilot, and careerists will be electioneering (indeed, Primary activity starts before the end of 2013), is the trilogue's hope that this might squeeze through via fatigue-inspired lack of inquisition? Does the alternative of a fresh crop of politicians picking holes in the work of technical experts from summer 2014 bear thinking about?

Finally, with Sr. Bernadino having already pronounced that 2016 would not be viable without Omnibus II agreement having been reached by the end of this year, can we provisionally move on to 2017 as the new 'go live' date?
 

Solvency II, Omnibus II and Trilogue - two steps forward, two steps back?

Headline results from an Economist Intelligence Unit survey have been published this week, apparently suggesting that most global insurers continue to see Solvency II as their biggest regulatory challenge. Despite its prominence in the agendas of insurers' committees, boards and control functions, the legislation appeared to have taken a back seat in the decision-making fora of the European Union since the publication of EIOPA's LTGA in June.

So while the EU Parliamentarians go off for their hard earned 5 weeks in the sun (and by association Omnibus II/Solvency II will temporarily sit untouched like a pair of pink booties in Buckingham Palace), we can try and work out what the crack is with the dossier!

Trilogue
So with the Trilogue process itself necessarily one of closed doors, secret handshakes and unpublished shady deals, at least we formally know that they reconvened before the summer holidays thanks to Sharon Bowles' diary handler! Other than InsuranceERM's piece on a "muted start" to the negotiations (subscription only), the well is pretty dry on comment, suggesting that they got off to an inauspicious (re)start.

Parliament
As far as the latest ITER listings go (p1), ECON will not be considering the dossier again until 18th November 2013. From what I can read of the Parliamentary calendar, that is too close to supply the November Plenary with anything to vote on, and the December one is scheduled early in the month. Fair to say that, as indicated by Burkhard Balz last month, the Parliament won't vote on Omnibus II before 2014?

Council

Bed made - but covers stolen...

So the Lithuanian presidency is in town, and apparently sees the Omnibus II dossier as having "high importance" (p3) within their recently published work programme. ECOFIN have a state of play meeting provisionally scheduled for 15th October 2013.

That said, when pressed for comment when attending ECON before the summer holidays, they seems to have learned from the Paula Abdul school of making progress: for the two steps forward indicated by the Lithuanian Finance Minister's comment that the Presidency is committed to resolving, amongst other dossiers, Omnibus II (p12), he immediately takes two steps back by noting one of the key tactics will be "...focusing on uncontroversial technical issues to facilitate progress" (p13) - might be OK for some of the multitude of delayed dossiers, but not this one!

EIOPA
EIOPA naturally consider their work largely done for Omnibus II, and consider the report a "reliable basis" for making decisions on LTGs, and ultimately Omnibus II itself. Sr. Bernadino did however admit at the ABI conference a week back that, for 2016 to remain a viable "Go Live" date, political agreement on Omnibus II would be needed by the end of this year. Judging by Parliament's position above, I guess 2016 is out then!

European Commission
While Commissioner Barnier had lavished praise on EIOPA's, errr, "very good [LTGA] report", the Commission has lost its Solvency II specialist to retirement during this year, which might lead some observers to believe the Commission will be less effective as a negotiator while the new boy learns the ropes. However, Gideon managed to get some words from Karel van Hulle's replacement a couple of weeks back, and his modus operandi doesn't sound like one which will lead to a swift decision at the expense of one or two angry outliers in any case.

Specifically his comment that "We need to find a solution that works for almost all Member States. That is our ambition. So we don’t like to get the project through, just about ", suggests that anyone at the table with a gripe will get some airtime. With the LTGA outcome causing more gripe than at a constipated nursery, I suspect that the delays caused by the current 5 week vacance soleil will be a mere drop in the ocean...

EU Commission and Quick Fix 2 - Silence is golden (delicious)...

We are a good week down the line since Solvency II technically became a rolling ball, at least from a 'transcription into national law' perspective, and the party has barely stopped around the EU...

Man from Del Monte
- he says 'Non-Compliant'

Joking aside, the wonderfully obscure lobbying miscreants at ICODA released findings (expanded on here) of a straw poll they had issued to all member states around their preparedness to implement both Solvency II and EIOPA's interim measures. Not even half of those polled responded, and only 6 responded in full, so the sample isn't ideal. That said, there are enough seeds of doubt sown by the responses to grow a Del Monte-style orchard of non-compliance by next year.

As one would have anticipated off the back of the last-ditch attempt to secure a second 'quick fix' Directive, there would appear to be major concerns around NSAs meeting the requirements as at 1st Jan 2014, for example;

• All respondees are in favour of 'Quick Fix 2'
• 40% don't feel adequately prepared for ORSA obligations
• Half are not prepared for internal model pre-application obligations
• A quarter are not prepared for submission of information obligations

Is 'Quick Fix 2' simply being seen by some of the straggling NSAs as an opportunity to postpone the inevitable rather than to actually prepare for it, thus avoiding the decadent yet ultimately unnecessary project spend of the early adopters? Indeed, is 'Quick Fix 2' even legally possible now that the date for transcription into national law has passed?

I took the opportunity on Monday 1st July to contact representatives of note to ask where the legislation currently stands, specifically around the potential for retrospective 'Quick FIx 2', and received the following cavalcade of replies in the last 7 days;

• EU Commission - nothing
• An EU Parliamentarian heavily involved in Solvency II - nothing
• EIOPA - a holding e-mail thanking me for my question

I hope that world exclusive information helps you all with your preparations!

Late post-script - I didn't bother checking in with the Council, but they have surprisingly made public comment today due to the changeover in presidencies to the Lithuanian delegation. Knowing the guys in Vilnius are big fans of the whole Solvency II shooting match (?), it was interesting to see they only have "...continued negotiations on the Omnibus II insurance dossier" scheduled over the next 6 months, as opposed to something more positive. We'll certainly be seeing Santa before the Parliamentary Plenary vote then, big question is will we also see the 2014 Easter Bunny?

Solvency II delays - the unanswered questions...

There's a couple of unanswered questions loitering around in the Solvency II space which I'm sure a more plugged-in switched-on kind of girl could answer, but which I'm struggling to pin down. Looking forward to hearing from anyone on the following;

"Quick Fix 2" - as far as the paperwork from the first "quick fix" is concerned, the Solvency II 'clock' starts ticking on 30th June 2013, and despite the brave attempts of a cabal of Parliamentarians to obtain a second "quick fix", it seems like they failed. Is the clock really ticking for transposition into national law as of Monday?

Omnibus II - putting quick fixes to one side, the anticipation of EIOPA's LTGA report feeding into a positive EU Parliamentary Plenary vote in October 2013 was one of the anchors of what one might call a timely implementation calendar (i.e. 2016). In a typically unannounced manner, the indicative Plenary date, which had already been kicked down the road at least seven times, has this week been inauspiciously removed from the Procedure File entirely (confirmed here on the 'History' tab on 20/06/13).

With EU Parliamentary elections scheduled for May 2014, and Parliament begging for the Solvency II inertia to be broken beforehand, do we reasonably have another window to get Omnibus II through a Plenary vote before that political upheaval, or is the removal of an indicative date acceptance that the LTGA has generated more problems than it has solved?

(Level 2) Implementing measures - the European Commission had these timetabled in their 2013 "expected adoption dates" list, chalked down specifically for Q4 2013. In the last two months this has been removed from the list in its entirety (well spotted Norton Rose). Is this direct acknowledgement that, as indicated by Burkhard Balz last week, that there is no chance of Omnibus II clearing the Plenary hurdle this year?

Someone must know something - don't be shy!

EIOPA's Long Term Guarantees Assessment and the early fallout - Plenary delay pending?

EIOPA's Long Term Guarantees Assessment rocked up last week while I was enjoying my new arrival, perhaps the most eagerly anticipated document out of Frankfurt since the days of Goethe...

Wielded fiercely all year by all stakeholders in need of an excuse for the delays in Solvency II's legislative passage (and hence the need for more budget), it appears to have variously pleased everyone and no-one at the same time. The key findings/recommendations are nicely summarised here.

Major players have since piped up with the following over the last week, none of which suggests the report's conclusions will be ole'd through the trilogue and parliamentary vote. 

EU Institutions

EIOPA 

- "We are confident that the results of the LTGA, combined with the EIOPA advice will provide the EU political institutions with a reliable basis for an informed decision on the long-term guarantee measures and a conclusion on the Omnibus II negotiations"

EU Commission

- "The Commission trusts that the Council and Parliament will use this very good report and its findings as a basis for an urgent agreement on Omnibus II and show pragmatism and willingness to compromise"

EU Parliament (via Burkhard Balz)

- "Speaking for the European Parliament, we are very confident that Eiopa's work and the subsequent analysis will provide for a successful restart of the negotiations, and as rapporteur, I am ready to start as quickly as possible, even before the summer break, to pre-launch trilogue negotiations. It is our firm intention to conclude the long-term package before the end of this year, so we can adopt Omnibus II in early spring 2014"

Industry representative and lobbying bodies 

- Insurance Europe - "Insurance Europe’s preliminary review of EIOPA’s proposed improvements to the Solvency II regulatory regime shows that adaptations are needed to avoid unnecessarily damaging insurers’ ability to provide long-term guarantees and invest long-term"

- GCAE - "With the publication of the report, the EU is one step closer in the process to finalising the Solvency II dossier"

- UK's ABI - "The EIOPA report is a small step in the right direction. But there is still a long way to go before British pensioners can be confident of a reasonable deal on their annuities"

- Institute and Faculty of Actuaries - "Today’s proposals outlined by EIPOA (sic) would seem to address many of the important issues. However, the detail needs to be worked through and the effect in a variety of scenarios assessed, before the full implications of the proposals for companies and their customers can be understood"

Ratings agencies

- Fitch - EIOPA’s proposals “offer no prospect of an end to the long-running dispute between regulators and insurers over suitable capital levels for products with long-term investment guarantees"

Print Media

- Commercial Risk Europe - "...unlikely to resolve key issues stalling the implementation of Solvency II and may lead to yet further delays to the Directive"

Consultancies

- PWC - "many insurers may find the proposals onerous and will not welcome the continued uncertainty over the final rules. We anticipate there may be concerns about the capital required for certain types of assets backing annuities in particular; and the effectiveness of measures designed to address short-term asset volatility"

- KPMG - "...it is likely that certain European countries will look very unfavourably at the EIOPA proposals."

I have emboldened the quote from Burkhard Balz above which suggests that the Omnibus II vote is going to move again. The rationale for that is two-fold; the prospective Plenary date (which was down as October 2013) appears to have suspiciously disappeared from the EU Parliament's Omnibus II procedure file altogether, while Mr. Balz clearly states early 2014 is targeted 'adoption date' while 'speaking on behalf of the Parliament'!