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?

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.

PRA - Q&A from December's Industry Briefing

Following on from the PRA's Industry Briefing on Solvency II prior to Christmas, they have released a set of Questions and Answers, which appear to have prompted by questions asked on the day as opposed to being more generic. A useful document to push around your programmes in the UK in particular, even if you are not part of ICAS+/IMAP.

I was particularly interested to see if they had rowed back on any topics where they have previously expressed an opinion, as well as any new insights which aren't necessarily made public as a matter of course. The Q&A is broken out into topics, so I have grouped my thoughts accordingly.

Proportionality

• For ICAS+, the PRA are "...focusing in on those areas which move the dial the most", referring specifically to the ICA calculations.
• They will therefore apply "a relatively higher view" in some areas than others (later referred to in terms of their intensity of focus).
• They use their IMAP approach as an example of this, where they have grouped the 300+ requirements into 15 categories.
• My common-sense read of this is, to be proportionate in the above context, the first 7 consecutive categories on the IMAP template would receive less time and attention than the following 8, all of which have the potential to numerically "move the dial".
• They are already looking prospectively at firm's risk profiles during planning sessions, in advance of ORSA, so that they work and plan proportionally, but with the future in mind.
• They suggest that firms provide their own opinions on materiality if they wish for the favourable application of the proportionality principle (though they don't guarantee it!).

Documentation-specific proportionality

• Confirm that "...there is definitely a need for an improvement in the quality of documentation".
• Seem to specifically align the calibration requirements of Solvency II with the need for additional documentation, therefore a good area to be elaborate in your work.
• On expert judgement, they suggest that documenting why a judgement was made, and what were the alternatives will help firms currently falling short.
• "...no aspiration" to revisit documentation review work already conducted and concluded.

PRA's Supervisory Statement

• They confirm that letters confirming whether a firm is covered by the reporting guidelines will be sent this month. They suggest categories 1-3 (p20) will be the bulk of participants
• There are national-specific reporting templates to come, currently under consideration. While they are not certain on submission format for those, they reiterate that xBRL is required for QRT submission.
• QRTs can be submitted incomplete, but they reserve the right to intervene if you take too many liberties!
• Acknowledge that, due to most firms' ORSA Processes operating around year-end balance sheets, that they expect to receive a flood of ORSA Supervisory Reports, and that this will delay feedback (presumably worse in 2015 than this year?).
• A question regarding 'who is the ORSA for' was answered rather dismissively. However, bearing in mind the content of their "good and bad documentation" letter (which constantly refers to "the reader", which for me meant "the PRA"), it felt like a reasonable question. Clearly if the PRA do not like your style, it will add to your review time.
• They seem to indicate that the amount of time one's Board should spend on reviewing/using their ORSA is not subject to any periodic expectations. That means if you are planning for annual intensive interaction, or something more regular and fluid, you should get a fair hearing from the PRA.

Standard Formula

• Without much subtlety, they seem to be encouraging firms to look at the appropriateness of Standard Formula asap, encouraging further by stressing "...that internal models do not need to be overly complex". This feels like early positioning for their planned SF work with the industry, where no doubt they will find a few firms ripe for USPs/PIMs during the next 18 months. 

Early Warning Indicators (EWIs)

• Following on from a post in October, they are evidently still stuggling to calibrate them!
• They confirm that the purpose of automatic capital add-ons (in the event of a future EWI breach) is to freeze the modelled capital figure to prevent distribution

Trilogue

• Question 29 is a good example of the PRA showing where their hands are now tied, and where EIOPA will be the provider of guidance.
• Interesting confirmation that the Commission has apparently asked that as little as possible of the Draft Implementing Measures be changed. Those of us working on non-mathematical areas can perhaps take some comfort from that!

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...

Governance Matters correspondence with the European Commission - Klaus but no cigar?

I mentioned that back in June that, as part of the EU-wide informal Solvency II shutdown, that I had fired off a couple of notes to various EU bodies to see whether or not a second "Quick Fix Directive" would be needed, or if the Commission were going to start proceedings against anyone who hadn't transposed Solvency II into national law (given that, after the 30th June, this was, on paper at least, a possibility).

We of course have had all of the information required on the matter since last week, and can now safely plan programme activity for 2014 and 2015, knowing that any forks in the road come Feb-March time may add another year to kick-off, but won't substantially change what supervisory authorities will expect from the industry.

That said, I was surprised and delighted to receive a reply from Dr. Wiedner on the matter today (below), albeit with an "after the Lord Mayor's Show" feel about it! In it he acknowledges that the threat of proceedings is indeed a viable one, but one which of course wouldn't be pursued in light of Quick Fix 2 (we'll work on the premise that it will sail through co-decision!).

 

So if you want your bureaucratic doors opened gently and without haste, you know where to come!

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".

ORSA/Forward Looking Assessment of Risk - EIOPA's FINAL preparatory guidance for national supervisors

EIOPA reuse the preamble from the System of Governance guidance in their ORSA/FLAOR guidance, save for confirming that an assessment of overall solvency needs will be expected in 2014 and 2015 (more on that later). I will use ORSA rather than EIOPA's shiny new acronym for my own convenience throughout this post!

It ultimately reads in parts as a circuitous and convoluted piece due to the way that EIOPA have had to splice the ORSA requirements into three component parts, as per Article 45.1 of the Directive, to accommodate the postponement of some elements until 2015. An horrific example of this is point 3.112, which to paraphrase Chris Morris, reads like the ramblings of a drugged horse.

That said, they have clearly had to contend with a mountain of feedback since the initial consultation paper was released, and have done a better job of explaining why most comments were, in EIOPA's view at least, misguided.

Again from the practitioner's perspective I would highlight in general that;

1. There is almost no discernible movement in EIOPA's position, even after lobbying;
2. That explanations for the inclusion of contentious content are generally forthcoming, though for this subject are more forthright and pragmatic (perhaps naturally due to the lack of L1 and L2 substance);
3. That 2014 ORSA is a genuine piece of work which will require the attention of the most senior staff in insurance firms - it would be a brave company that play-acts at any elements of the documentation, processes and outputs of the assessment.

Supporting arguments for EIOPA's final views are listed below, along with any relevant commentary from my practitioner's angle; 

Clarification re Omnibus II
3.49 - If go-live in 2016 does not happen due to further Omnibus II delays, "...undertakings will still be expected to perform the [overall solvency needs] assessment from 2014 onwards"

Clarification re continuous compliance with SCR and Technical Provisions calculations requirements, and the deviation from SF SCR assumptions assessment
3.50 - Confirm that these elements are postponed until 2015, and that technical specifications will be forthcoming from EIOPA by year-end to aid in the conduct of some of this activity.

Parallel running Sol I/Sol II concerns
3.53 - basically, not EIOPA's problem!

Compulsion for model applicants to also use SF in the assessment
3.54 - clarify that this in NOT about benchmarking models, rather "taking into account contingencies" should a firm's model not get through IMAP. A thoroughly negative and unsympathetic approach from EIOPA on this one I'm afraid

Timing
3.58 - "EIOPA considers it necessary that all undertakings perform the assessment of overall solvency needs at least two times during the preparatory phase, once in 2014 and once in 2015...[and] at any time during 2014"
3.60 - Stress that "...it is for the undertaking to decide on the appropriate reference date for its FLAOR", though couched in an expectation that financial year-end is most likely.

Guideline 5 - Delegation of activity by the AMSB
3.73 - "not acceptable" to delegate full responsibility for ORSA to sub-committees of the AMSB

Guideline 7 - ORSA Policy
3.62 - "...it is necessary to develop a full policy during the preparatory phase"
3.63 - "...[The ORSA Policy] may be part of the policy on Risk Management", though must be clearly identifiable

Guideline 8 - Record of the ORSA
3.64 - Rather bizarrely suggest that the ORSA Record is "...no less, but maybe even more important during preparation that after the start of Solvency II", but either way the message is clear - maintain the records carefully

Guideline 9 - Sharing information internally
3.77 - "It is for the AMSB to decide which parts of the information will be distributed to whom" - clearly some panic amongst respondents that they may have to start telling the 'proles' about their future employemnt prospects!

Guideline 10 - Supervisory Report
3.66 - EIOPA "...does however not expect that the first report will necessarily already be perfect"
3.69 - AMSB sign-off, accepting the results of the ORSA is the trigger for the 2 week window in which to submit the Supervisory Report
3.70 and 3.71 - Some rather confused paragraphs which seem to indicate that, if there is enough resistance to the results internally, that extra time may be afforded to the firm

Guideline 11 - Valuation bases
3.79 - EIOPA scrutiny postponed until 2015, but justifications on bases used expected

Guideline 12 - Overall Solvency Needs assessment
3.83 - EIOPA expect "...it will take several years" before this assessment is good enough, hence they expect the preparatory phase to include practice!

Guideline 14/15 - Continuous compliance with SCR requirements and Technical Provisions calculation rules
3.85 - Postponed until 2015, and again justify activity prior to Solvency II going live by using a practice makes perfect mantra, noting that attempting to do this will "...intensify the learning experience"! I wonder if anyone ever used that phrase in their budgeting requests...

Guideline 16 - Deviation of one's Risk Profile from SF SCR assumptions 
3.89 - Postponed until 2015, and also note that quantifying one's deviation from the SF assumptions will not be necessary "...if there is no indication that the deviation is significant". I guess modellers will have to wind their necks in around Credit Risk assumptions in particular on this matter, bearing in mind the diversity of methods currently on display.

Ultimately, little opportunity for shortcuts then, but perhaps enough time to review what's already in place before resource planning your 2014 activities.

System of Governance - EIOPA's FINAL preparatory guidance for national supervisors

Based on feedback received since their initial consultation paper was released, EIOPA make the following generic clarifications/statements in the preamble of their guidance doc for System of Governance preparations;

• That proportionality will not be defined or presented as examples in the guideline text (p5-6)
• That NCAs are "expected to...review and evaluate the quality of the information provided to them" - bad news for the PRA, who were clinically uninterested in reviewing Solvency II reporting attempts according to one blogger (p6)
• The emergence of a new ORSA acronym, "FLAOR", which looks more like something an amused teenager would write on Facebook (p6)
• The expectation that 2015 will see submissions of (2014) ORSAs to NCAs (p7)
• While there is no generic take on what enforcement action should take place in this interim period, firms are expected to (a) Discuss any negative findings from their ORSA/Governance systems with their supervisor, and (b) To produce SCRs using information of appropriate quality. Enforcement action in the absence of this WILL NOT consist of capital add-ons, apparently (p7)
• That the submission date calendar for all of the information expected will be reviewed at the end of this year, so that EIOPA can take Omnibus II progress into account (p8)
• That the explanatory text in each set of guidance is NOT part of "Comply or Explain" (p9)
• That the reasons behind a negative "Comply or Explain" decision from any country will be kept secret as standard (p10, and disgraceful, frankly).

They then go on to focus on some of the larger bones of contention within the 52 guidelines provided. The following generic points stand out for me as a practitioner;

1. There is almost no discernible movement in EIOPA's position, even after a volumous lobbying effort;
2. That explanations for the inclusion of contentious content are generally forthcoming, though on a number of occasions, flimsy;
3. That planning for 2014 full-year mothballing of Solvency II programmes is not an option, particularly for ICAS+ candidates - some may get away with a few months of inertia, depending on the quality of their paperwork (strategies, policies, process guides/maps, terms of reference, charters etc).

The following supporting arguments for EIOPA's final view were, in my mind at least, poorly formulated, regardless of whether the end result is still agreeable;

3.48 (Guideline 6)

- Refused to add more definition around what constitutes a "significant decision", which is poor form.

3.58 (All of Chapter III)

- That the expectations of Risk Management in insurers  "...comprise risk management standards which are considered to be matter-of-course and wide spread activities" - extraordinarily loose, considering the lack of a majority-accepted global, or indeed pan-European standard on the subject (IRM/ISO/COSO/FERMA/FSB's efforts notwithstanding)

3.65 (Guideline 19)

- That, while it is "not an easy task", Operational Risks should be quantifiable, and therefore subject to tolerance limits - I don't think it would have hurt to suggest (or even compel the use of) a method if it is that difficult.

3.68 (Guideline 25)

- That firms should maintain Investment Risk-related KRIs outside of what might be provided by normal parties (for example, ratings agencies), which would help "...increase overall risk management" - not entirely convinced that a generic "increase" is any kind of worthy ambition. 

3.74 (Guideline 31)

- That a capital management policy and capital management plan is both necessary (though for not entirely convincing reasons when tying back to the Directive)

3.78 (Chapter VI [Internal Control])

- That there is already plenty of clarification on what the Compliance function is charged with. I would agree in principle, but have heard evidence to the contrary in practice.

3.81 (Chapter VII [Internal Audit])

- That they neither wish to mandate or discourage rotation of Internal Audit staff or whistleblowing direct to NCAs - in which case, why mention it!

3.110
- A bizarre comment in response to a suggestion that a public statement should be released by the AMSB annually regarding the discharge of responsibilities around the system of governance that the Directive "...only deals with internal governance, not corporate governance" - think I know what they are fishing at, but terribly worded.

3.144
- Justify their decision not to define risk appetite and risk tolerance in the context of these guidelines

They have however provided some more defendable clarifications, for example;

3.51 (Guideline 11)

- Clarified that the gold-plated "Fit and Proper" requirements apply to AMSB/Control Function staff only, as well as specify what is expected from Outsourcers.

3.57 (Chapter III [Risk Management])

- That in the context of separating the duties of the Risk and Actuarial functions, the Directive is abundantly clear and that undertakings "...cannot deviate from [the Directive's] distribution of tasks"

3.62 (All "Policy"-related guidelines)

- That efforts should be targeted towards drafting the required documents during the preparatory phase. I would imagine this would be "re-working" in the UK, where such activity is most probably long done.

3.67 (Guideline 19)

- That there is no compulsion for firms to operate an electronic database to store operational risk events

3.85 (Chapter VIII [Actuarial])

- That, regardless of the absence of a valuation framework for TPs, the processes behind their co-ordination and calculation justify early activity, rather than "wait and see" on Pillar 1.

3.124
- Regarding Op Risk, activity will have to include "...identifying all operational risks that have crystallised and their near misses" (my emphasis)

Relatively easy in summary then - if it was a gap/issue in your system of governance in March, it probably still is, so go and fix it!

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?
 

FTSE and European Insurers - Economic Capital and Solvency II trends - money pit filled?

Interim Results season - without question, the most exciting time of the summer for me (although to qualify that, I do live on the Isle of Man and blog in my spare time). As good an opportunity as any to peer review where the big boys are at in the UK and Europe, both on Solvency II preparations/costs and economic captial positions.

Solvency II project costs - on the wane?

As I had mentioned in an earlier post, the FTSE-listed insurers have gone noticeably quiet on both Solvency II and, in the UK's case, the havoc it was inevitably going to wreak in its 2012 form - while the 2013 silence "speaks volumes" as to the priority of the dossier, it is a smart idea to see what impact the threat of a 2014 start has had to EC positions of major insurers over the last 12 months (i.e. after last year's whingeing, did any of them actually do substantive capital-related activity!)

A few notes for each below;

Aviva

• Solvency II project costs of £44m - well down on £77m in 2012 year-to-June
• "...there is still significant uncertainty over the detailed requirements [of Solvency II]"
• Pro-forma economic capital surplus of 175%, up from 172% in December
• IGD coverage 1.8 times, up from 1.7 times in December

Axa

• Nothing on Solvency II at all or project costs
• Solvency ratio down to 218% (from 233%) since December - interest rated attributed
• Economic solvency ratio (calibrated to 1-in-200 VaR) down to 204% (from 206%) since December - dividend and market risk elements attributed

Allianz

• Nothing on project costs
• Solvency ratio (based on FCD) of 177%, down from 197% this time last year - change in accounting standards attributed
• "...Allianz continues to be exposed to two external forces that adversely affect our risk profile and would not normally be associated with our core operating activities: the European sovereign debt crisis and regulatory developments – especially the European solvency directive, Solvency II"
• No reference to economic capital or modelling

Legal and General

• "Investment projects and expenses" (which covered Solvency II last year) were £20m - £23m in 2012 year-to-June
• "...remains uncertainty both to the implementation timescales of Solvency II and the final calibrations that will be used for long term business"
• IGD surplus unchanged at £4.1bn, coverage ratio down to 226%

Old Mutual

• No mention of Solvency II project costs, same as last year
• EC coverage of "over 160%", calibrated to VaR 99.93%
• FGD surplus of 160%
• Dividend outweighed operational cash flows in the 6 month period, though this was due to the special dividend paid last year after a massive disposal

Resolution

• Solvency II project costs of £10m for the half year - well down on the £48m for 2012 comparable!
• "Proposals for Solvency II continue to be the subject of debate"
• EC Coverage of 192% - (194% in Dec - quantum increased by £200m though)
• IGCA coverage of 221% (222% in Dec) - sold a business unit, which helped cover dividend

Prudential

• £13m Solvency II project costs for the half year - £27m in 2012 year-to-June
• "...deferral until 1 January 2016 or beyond appears likely"
• "...we now know that it will not be implemented before 1 January 2016" - my emphasis
• "[potential for] optimising the Group’s domicile as a possible response to an adverse outcome on Solvency II" remains on the table, a copy/paste threat left in from last year.
• IGD coverage of 230% - quantum lower by over a billion since Dec, due to a change in requirements in their US business

Standard Life

• £36m Solvency II "and other programmes" costs for the half year - £42m in 2012 year-to-June
• Solvency II project "...continues to respond to changes in requirements"
• IGD down £500m since half year after accounting for a special dividend, and surplus generation down year-on-year (attributed to new business strain)
• IGD surplus of 185%, down from over 200% at YE2012, but up 11% from this time last year
• Not a single reference to "economic capital" in the document

Generali

• No mention of Solvency II
• Solvency I coverage at 139% - up from 130% this time last year
• Economic capital coverage of 167% - up from 159% this time last year

RSA

• Solvency II project costs down to £10m (was £16m  in 2012 year-to-June)
• "There remains continued uncertainty as delays in agreeing the rules have caused the planned implementation date of 2014 to be delayed."
• IGD covered 1.7 times - down from 1.9 times since December - dividends again cited in explaining the dip.
• Economic capital (calibrated to 1-in-200 VaR) £1.3bn, up from £1.2bn in December.

So a trend of steady Solvency I ratios, and no sign of any war chests being created by holding excess cash back - quite the opposite in some cases, with dividends (special or otherwise) on the high side. With project costs diminishing and barely a passing comment on the Omnibus II impasse, it looks very much like Solvency II is yesterday's news in the boardrooms of major insurers. 

That said, in just those insurers covered above there has been over £100m confirmed spend in the last 6 months on Solvency II preparations, during which time the implementation date has (informally) moved at least two years, IMAP has been elongated, and the LTGA panacea has turned out to be anything but. That's hardly chickenfeed, and the rest of this year can only get busier for the UK with ICAS+ and EIOPA Interim Guidelines to contend with.

I hope Finance Directors don't get too excited by the dwindling project spend though - we haven't started Pillar 3 yet, apparently!

Germany, BaFin and Solvency II - Tchüss wisely...

With the British Lions rugby team having had such a marvellous summer, it's nice to see that the spirit of "getting one's retaliation in first" has been brought back to Europe with them. The Executive Director of insurance at BaFin, the German regulator, came out swinging late last week (while the rest of Europe was lotioning up), and delivered his two'penneth worth on, amongst other matters, the Long Term Guarantees situation currently holding up Omnibus II.

Omnibus II trilogue - work to do

This is the same man who has recently been quoted as saying that delays are not a problem, as "Solvency II was not designed for today". Which is true - strictly speaking, it was designed for about 8 months ago!

The German contingent have been labelled in a number of articles (here, here, here and here) as a major source of legislative delay (presumably ever since they twigged that the proposed design of the extrapolation element was massively unfavourable to their industry), and the lobbying angles pursued here are not really new news, but to emphasise;

• Concerned about the increase in interest rates at Central Bank level - "should be carried out gradually", though rather disingenuously saying that they would have no influence in that - BaFin may not, but Chancellor Merkel and the overflowing pot of export surplus certainly does!
• Solvency II go-live of Jan 2016 "absolutely realistic" provided the trilogues are finished this year - I've noted in earlier posts that the official schedules of the co-legislators are looking shoddy in this respect, so I'm more inclined to side with S&P (and indeed the president of BaFin!)on 2016 being on shakier ground than a Hippo's decking..
• That transitional periods should be determined individually in accordance with a firms existing maturity profile - they want to avoid an insurer "falling over" just to meet the new regulation. Worrying that after 10 years of efforts, Solvency II compliance still carries such a credible threat of business closure! 
• As they have so many insurance contracts (90m cited), they would simply "say goodbye" in a worst-case scenario if they don't get their way on transitional periods.

So the likelihood of the German industry "taking one for the team" here is pretty small, and with Hrs Balz and Giegold having made it pretty clear that the LTGA result will not elicit a swift conclusion to trilogue negotiations, it looks like there's still plenty of talking to be done...

FTSE and European Interim Reporting - Solvency II off radar

So it's Interim Reporting time again for Europe's beleaguered insurers and as far as internal models go, another one has apparently bitten the dust - Old Mutual formally withdrew from the PRA's Internal Model Application Process in early 2013 "...as a result of delays in Solvency II implementation" (p14), joining Resolution on the sidelines.

Solvency II - 'Time of your life'?

This time around there appears to be a conspicuous absence of comment on Solvency II and indeed Omnibus II, unlike this time last year, when every firm had an opinion about Solvency II's legislative progress and its financial cost.

This is not so unusual for the mainland Europeans such as Allianz, Axa and Munich Re (all of whom had nothing new to say at the half year), but the UK firms have normally used the Interim Report as an opportunity to sound off. With Old Mutual (above) and  Legal and General so far only offering minor comments on "delays" and "uncertainty", have both the industry and the legislators given up forecasting the end game, and put the Solvency II "baby in the corner"?

Hopefully the remaining big hitters such as Pru, Aviva and Standard Life will have something to say over the next couple of weeks.

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...

ABI and PRA on 'Meeting the Challenges of a Changing World' - Solvency II in particular...

Low Yield issue - not just for insurers

While I disposed of my son for the summer last week for an extensive potty training course in Bordeaux (PS you might want to avoid the 2013 whites!), the ABI gathered the great and good for their biennial conference, themed Meeting the Challenges of a Changing World.

A corresponding publication from the ABI which the event hung its hat off to a certain extent is particularly useful for anyone in the emerging risk/ORSA/reverse stress testing space, touching on 7 specific 'challenge' themes, which are themself further broken into sub-categories. With the ABI providing a mouthpiece for the interests of the UK insurance industry (and being currently Chaired by an avid opponent of Solvency II), it was worth picking up on this document's take on Solvency II, specifically;

• That it could be a future constraint on the nascent equity release market
• Its well documented "...potential effects on infrastructure financing"
• That British insurers should "...[continue] being proactive and engaged in trying to shape vital regulation such as Solvency II rather than simply criticising it from the sidelines". Not sure if the implication is that the UK is drifting from the box-seat in this regard, but certainly in the context of the next decade, a slated in/out referendum on EU membership may make proactivity on Solvency II a moot point!

The regulatory meat in this lobbyist event sandwich came from a keynote speech by the PRA's Andrew Bailey which, in the process of publicly revealing a few nuggets of truth, still left me safe in the knowledge that insurance is still the banking industry's boring cousin - that he needed to "...make clear at outset that insurance supervision matters as much as banking supervision" and stress that "...insurance supervision is a skill on its own" while supporting most prevailing regulatory techniques with the prefix 'what we learned from Banking is...' tells its own story.

That aside, the following comments are worthy of highlighting;

• The PRA's current trend of using "business model analysis" in their supervisory work - surprised that this was not already par for the course frankly (what else other than the types of analyses referenced at the bottom of p4 would you be doing?), but one would expect that the advent of ORSA will enhance everyone's activity in this field soon.
• Taking that into account, it is "...logical for us to make early adjustments to our existing regime to incorporate the ORSA under ICAS+"
• The suggestion that management "...take responsibility for understanding and mitigating the risks in their business" - 'managing', rather than 'mitigating' surely, we'll tolerate anything within appetite!
• That the truly woeful "Solvency II/Crossrail" costing analogy used by Mr Bailey to a parliamentary select committee was the PRA "...making a point on behalf of firms".
• That "PRA have not withdrawn from involvement in Solvency II, far from it", though recognises that the result around the classic matching adjustment is not what UK plc would wish for - goes on to comment that we "...still have a good way to go to make the Solvency II regime manageable in its use and implementation"
• That, as far as Sol II's legislative progress is concerned, negotiations "...continue over summer, with a conclusion expected in the autumn", and that the official implementation date discussed recently on this blog is "clearly unrealistic".

In a week where a wall of silence has descended upon the co-legislators and the Commission, it is reassuring to see at least one NSA body with a solid-ish implementation plan, regardless of the immediate lack of things to implement - however judging by the words captured by Gideon of Dr. Wiedner, the lightly briefed (and from what I could read, lightly fed) replacement of Karel van Hulle, I suspect that Solvency II on the whole remains "Klaus but no cigar"...

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'!

More from EIOPA and PRA on internal models - anything you can do...

Certainly looks like there is a bit more mileage in this back-and-forth around internal models and the assessing of their appropriateness. As I posted recently, the UK's PRA have come out fighting on the subject of 'Early Warning Indicators' (EWIs) to highlight where a company's internal model, for fair reasons or foul, may be measuring the Solvency Capital Requirement in a way which does not meet the required calibration standard of the 1-year VaR at 99.5th percentile.

Early Warnings - time well spent?

EIOPA, through the words of their Chairman, have already made a pitch for assessing internal models on behalf of our overworked national supervisors, at least at some point in the medium-term future. It would now appear they have also piggy-backed the PRA's work around developing and monitoring EWIs as well!

That article is on Risk.net, so for non-subscribers, EIOPAs work is specifically looking at (in the author's words, not EIOPA's) "...threats to a firms solvency that are not picked up by the company's internal model". These will include qualitative and quantitative measures, and are due to be discussed (by their internal models committee) in the Autumn -  you know, that relatively quiet point in the Solvency II implementation calendar...

The EWI article was published at the same time as an interview with Sr. Bernadino and Insurance Risk magazine was released, where the tone of the interview is particularly aggressive around EIOPA's inability to compel national supervisors to "comply" with their recently-issued preparatory guidance. Whilst it is hard not to admire his optimism ("we are moving closer to the date of implementation"), he is quite fixated with "some countries" who, without EIOPA's guiding hand, he feels would end up divergent from the rest of the market.

I certainly am not familiar enough with continental Europe's positions as it stands, but it certainly reads like a not-too-subtle finger point at Royaume-Uni at the very least. He also goes on to mention that, while 'full Board support' was received at EIOPA to issue the preparatory guidance, not all participants were 'completely happy'. One would certainly feel aggrieved at the smaller end of insurance supervisors to comply-or-explain on preparations for a new regime which doesn't have a kick-off date, while still having to administrate the existing one!

An interesting side-issue around potential discord amongst the states is this recent request (which I have procured through the magic of Google!) from most of the Member States for a second "quick-fix" Directive, based on the fact that some of the implementation countdown dates that feature in the first one are next month (good spot Gideon)! According to the letter, the Commission already appear to have singularly ruled out the need for another quick-fix,

Four countries didn't make it onto the list of senders (Ireland, Netherlands, Malta and Lithuania) - not concerned, or not consulted?

Also worth highlighting the recent spectacularly ill-timed London press strafing of the internal modelling world - an strange development, particularly at the same time that the UK Independence Party has been lifting up its dress for London's financial sector to have a gander underneath. With some of the UK's bigger beasts such as L&G and Pru already openly hostile to Solvency II (and Resolution being an early faller in the IMAP stakes), is there potential for the rinsed-out UK insurance sector to throw its weight behind a political force such as UKIP, who would happily make an EU Directive bonfire, using Solvency II for kindling?