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".

Barnier speech to the Insurance Europe conference

Msr Barnier put a few words out for the great and good the other week at the Insurance Europe conference, which have finally been published for the proletariat on the EUROPA website this week. As well as touching on the conjoined matters of IORP and IMD, he wades into Solvency II in a pretty forthright manner (driven by the increasingly fractious and desparate attempts of the EU to jump-start economic growth, and what the Insurance industry can do to aid this), noting;

• Solvency II should not prevent or discourage investment in certain asset classes per se
• Insurers with long-term guarantees should therefore be rewarded (via a reduced capital burden) for investing in long-term assets, and that Omnibus II should mop up outstanding concerns from individual countries.
• That politically, the EU Parliament has had plenty of time to reflect on Omnibus II, and their tardiness has ultimately led to the need for Solvency 1.5

Interesting to see real world politics and probles interacting with the legislative timetable, and in particular how quick the Commission have been to point the finger at their Parliamentary pals when under duress!

Barnier Letter to CEA/CRO Forum/CFO Forum - full text

Bit late, but for my own records I'm just making sure I have Michel Barnier's full response to the lobbying forums on the blog (previously only had an abridged version).

Few notes;

• Solvency II "has been subject to more consultation and impact studies than any other piece of legislation I am aware of" - referenced like a badge of honour, as opposed to any negative connotations
• "Not surprising" that surplus capital has declined - is the implication that the industry is undercapitalised
• Commission is not convinced by lobbyists argument on contract boundaries in particular