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 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'!

Omnibus II - back to June 2013

Inevitably, the spectre of reality has successfully haunted the facade of optimism until it requires a change of underwear - the Omnibus II Plenary has been shifted out to June 2013 over the weekend. After last year's rather ambivalent stretching of the scheduled Plenary date once the summer holidays/change of presidency approached, this looks like it possibly has more legs next year (why talk Omnibus II when the weather is so nice!)

This certainly gives the beleaguered industry a bit of breathing space to perform whatever data collection is required during the LTG impact study/QIS6 at the same time as standard financial year-end pressures start to pile up for the largest lobbyists - strangely still haven't seen anything definitive on EIOPA's mandate for the study yet, the scope of which appears to have been harder to pin down that one would expect (the FSA's Insurance Standing Group indicating one source of discontent from their September minutes

The coincidence of this being announced at the same time as news of Mr Van Hulle's impending retirement broke is a funny old one, but as Peter Skinner's decision not to run for re-election is also referenced in that article, maybe this changing of these battle-fatigued protagonists over the next 12-18 months may encourage all sides to stop tip-toeing through the tulips.

PS Early retirement? Anyone would think they're trying to get their annuities bought prior to go-live before Solvency II wipes 20% off!

Omnibus II and the inevitable delay - why it's not so clear cut

Fantastic work over on the Solvency II Wire from Gideon on the meat and potatoes inside the eternally-baking Omnibus II pie, illustrating why the trialogue parties haven't just rolled over and declared 2015 as the new 2014.

While it would appear that the lobbying arms at Insurance Europe, AMICE, GCAE etc haven't piped up on industry preference yet, it looks like we have two deeply unpleasant alternatives to look forward to; hard launching a year late (i.e Omnibus II would only get signed off after the recently requested LTG consultation but 2015 would be the definitive "go-live"), or soft launching with 2 years parallel running (i.e. Omnibus II can go through before the LTG consult is finished, but with the sword of Damocles hanging over its contibution to the regulations until 2016).

My guess would be that there is little appetite in the firms for parallel running Solvency I/Solvency II to 2016 based on the administrative burdens this would currently place on the UK in particular through the current ICA process. A 'hard' 2015 and some more effective leadership in Brussels would be welcome relief to Solvency II Programmes from a planning perspective, though the knock-on effect on the model approval process and other scheduled supervisory work is yet to be seen.

Oddly, the EIOP-ians of the world pushed out the 2013 Work Programme this week which of course skips over any of the practicalities around such a delay - so having "already achieved a great deal" in Solvency II prep, they will "finalise the [53] standards and guidelines" currently required of them, set up an "internal model support expert unit", and "finalise the preparation of the [supervisory] Colleges" - and all of this while Rome burns!

It is a perverse situation when a subject as politically divisive as capital requirements for long term guarantees across the union is not as complex as trying to get three well-briefed parties around a table to agree on an implementation date. At a time when the Commission wants an inflation-busting funding rise (which Parliament have 'ole'd through) and EIOPA have grown in headcount and cost by 50% y-o-y, the alarming regularity with which national self-interest and horse-trading has derailed a project of such significance makes me long for the jingoistic certainty of the Corn Laws - I'm guessing that's not a good thing...

Omnibus II moves again - accelerating the inevitable?

No sooner has the holiday season drawn to a close (and by that I mean everyone else's holiday season, as we don't 'do holidays' at Governance Matters...) than our good friend Omnibus II has jogged down the road another month - the procedure file has just been updated to show it will be hitting the November parliamentary Plenary (by my count, the 5th postponement since 2011).

Not entirely sure of the rather abrupt nature of this movement, bearing in mind the main players are probably still wearing their 'budgie smugglers' in the Med at the moment, but Gideon over on the Wire picked up on an issue which may have led to an early concession that October was simply too early, with an impact assessment on LTGs likely to roll off the back of the next trialogue.

We are also close enough to the finish line (don't laugh) to be getting into the national political cesspits, so a whiff of sabotage and national interest may also be coming to bear. Not only have the UK political opposition decided that Solvency II is controversial enough to start point scoring on, but last month Sharon Bowles (current Chair of ECON) gave an astonishingly frank interview to Risk.net (subscription only I'm afraid) where Das Küchenspüle was thrown at the German contingent. Quotes included;

• "...certain leading German MEPs have publicly said that Solvency II is never going to happen anyway" and
• "...I think there is a subtext here that the Germans - and I think this is well known - are trying to jettison the whole of Solvency II"

Well if Der Wahnsinn really is eine schmale brücke like the song says, its probably best not to cross it!

Solvency II - 7 year transitional periods, white noise and Omnibus II on the move

A particularly weird week for Solvency II, with more aimless racket than a drunken tennis player, yet only a slither of substance to it.

Ignoring if I may the robust line being taken by the UK Pensions Minister about occupational pension schemes falling under Solvency II and the Daily Mail's scare piece on annuities becoming potentially more expensive, the big story has of course been Burkhard Balz's alternative for life insurers (presumably on the trialogue table for longer than the last couple of days, but leaked this week to FT Deutschland for the scoop) to transition in the more onerous capital aspects of Solvency II over as many as 7 years.

Bearing in mind the rather blase attitude at the time towards extending the Omnibus II plenary vote to September ('all they are doing over the summer is technical drafting' was the party line), to have something so significant being kicked around the table at this late stage is a truly grim prospect, particularly if it is loaded with national, rather than pan-european considerations.

Of course, conjecture around knock on effects on the legislative timetable is only as good as its source - hence I have linked through to the Omnibus II procedure file, which has been updated to reflect a late October plenary vote (when it was previously Sept 2012, July 2012, April 2012, Jan 2012 and Dec 2011!).

I'll leave it to the experts to work out whether 2014 is realistic given the trialogue curveballs and the phantom plenary...

Early IMAP submission postponement - knock on effects?

Having seen the comments of the FSA's man (p4) on those firms scheduled for early internal model application assessment (namely that "it is vitally important that submission slots are adhered to"), it seemed more than coincidental that the Lloyds of London application, due in at the end of April, has been pushed back 3 months.

Not sure of the drivers behind it (indeed it is worded like they are doing the FSA a favour!), but the recent release of this PwC document on "learning from the early movers" seems prescient, particularly around bridging gaps in preparedness! Alternatively, this article suggests that avoiding dual runs of ICA and internal model in 2013 has driven the delay.

Regardless, while the FSA have gone to some lengths in the IMAP industry presentation to ask for adherence to timescales, pleading personnel poverty, is there a danger that such a big player getting reassigned this early on will have knock on effects for other applicants?

Late post script - Lloyds FD put some words out in relation to the delayed application, justifying it after some FSA 'backtracking' on application completeness.

Omnibus II - delay to September long enough?

You know what it's like - no Omnibus delays for ages, and then three come along at once (boom boom)! From January to April, April to July, and now announced today, July to September, the basic logistics of bifurcation in 2013 are starting to look decidedly ropey, even if 2014 go-live is still achieveable at a push.

Frankly, once you factor in the complexity of the trialogue procedure and the rather savage nature of clashes to date in ECON, its probably best for this one to simmer over summer after a good three months of Council, Parliament and the Commission kicking it round.

PS The procedure file has definitively been changed to reflect the change to the September Plenary - lets hope the Parliament enjoy their summer holiday more than the guys picking up the project tabs!

Solvency II - Another year (or two) later?

As flagged by Reuters earlier, the German FT has cited an "industry insider" as having whispered that a move to 2015, or even 2016, is a possibility.

While the general chatter in the FT article covers some supportibng argument on the quant front, the legislative timetable argument is a lot more compelling. Bearing in mind that the ECON vote has moved, but the plenary vote currently remains unchanged, should any delays or differences of opinion hold up Omnibus II clearance above and beyond the summer recess, the knock on effects would perhaps support this (i.e. bifurcation or not, Jan 2014 would not be achievable).

As ever, I guess the parliamentary vote date is the one to look out for!

Late post script - Reuters ponied up with another article today which touches on the story but brings in Peter Skinner's explanation of the delay

Omnibus II delay - ECON moves, Plenary stays still?

No doubt you all enjoyed Gideon's reportage from Friday (leapt upon by the other outlets shortly afterwards) that the sign-off on Omnibus II from the specialist EU parliamentary committee ECON, scheduled for this month before moving on to a full plenary (i.e. all of the EU Parliament) vote in April, had been yet again postponed. For you Brits, the FSA have commented on this development as well.

Easy to speculate on the causes of this (indeed the recent snub by David Cameron on the bail-out front is cited here as perhaps having weakened the UK's lobbying power at a time where they perhaps have the most to lose), but fair to assume it is still on the numbers front as opposed to Pillar II or III.

Worth flagging here that, while the ECON vote has now been changed to end of March on the Europarl website, the full plenary vote is still as it stood previously (mid-April). This could be the reason why most public comment since Gideon broke the story has been reluctant to say that this delay might shift the go-live date.

Good news then I guess...

Additional delay to EU Parliament vote on Omnibus II - change in priorities?

Having blogged late last week on the reasons for the EU Parliament being a notable no-show at the ABI Solvency II conference last week, I was pretty shocked today to see that the delay on voting on Omnibus II (mooted by Sr. Montalvo only last week by the same publication to be a delay until the end of Jan 2012), has now apparently been moved back to April 2012.


This would clearly be a dreadful result for both the industry (on the uncertainty front) and EIOPA (on producing technical standards), and bearing in mind the disdain and petulance currently being displayed by the Parliament and head of the Commission towards the UK, might we expect to see some last minute shenanighans from the Parliament to the detriment of the UK industry regarding, say, transitional measures or the illiquidity premium?


Look forward to hearing what the other institutions themselves have to say about it - delaying the parliamentary vote to January is one thing, April is surely stretching their patience, regardless of the competing priorities at present.

Post script - proof of the pudding is in the eating

Julian Adams speech on IMAP and Solvency II delay

The speech from Julian Adams is worth picking apart for crumbs of comfort for any organisation who will be potentially running up bills for another 12 months in light of the extension announced by the FSA at the start of October for their IMAP processing.

Spectacularly, one of EIOPA's guest attendees was, you've guessed it, delayed! As I didn't attend, I cannot confirm if this raised a chuckle in the hall, but more important than the comedy value of an unexpected EIOPA delay are the things put on the table last week, namely;

• That the workload anticipated by the FSA both pre and post Solvency II appears to be higher than anticipated (more entity level ORSAs/SFCRs than expected for a start).
• "...very likely that some form of Solvency II reporting will be required during 2013", regardless of the delay.
• "Submission slots" were allocated primarily after assessment of each applicant's SAT, but alos taken specific Solvency II outstanding issues into account (which must mean preparation on the college of supervisors front is severely lacking to be cited here alongside matching premiums! This is not necessarily a UK failing however)
• No more applicants will be accepted for day one approval just because of the delay, and no changes to model scope will be allowed without express permission.
• More to come "in coming weeks" on the big question about whether ICAS can be jettisoned by the industry for 2013, to be replaced by a provisionally approved model - also doesn't cover if Standard Formula firms will have the same option open to them as, say, the Lloyds syndicates and other lobbyists for a 2013 early start.

More to come soon apparently, so let's keep our eyes peeled!

More on FSA Solvency II delay to 2014

Some cute contradictions beginning to emerge off the back of the FSA's pronouncement on extending the IMAP window to 2013 and the go-live date itself to 2014 - EIOPA's top man Carlos Montalvo warned the following day not to "put Solvency II in the fridge" (chillingly?), which is all well and good when Omnibus II appears to be pretty well refrigerated itself!

Similarly, Post magazine have reported that smaller firms will be relatively happy at the FSA's news on the basis that they are not as far down the road. Interestingly one of the "Big Small" firms, LV+, has an executive quoted in the Wall Street Journal no less to express his dissatisfaction at the "unhelpful" prospect of delay, and noting that they plan to crack on with a 2013 target.

It should be noted that the quote was pulled from a press release from some Marketforce research due to be published in November which seems to be focused on supporting the very early adoption ruled out in the same week!

GCAE Minutes - "disappointing" delay

The Groupe Consultatif Solvency II working group pushed out their minutes for June (post-Omnibus II announcement). Interesting to see that they are disappointed with the "very probable" delay, as well as a conspicuously larger-text paragraph on how a lobbying point on calculating Life Technical Provisions has yet to be resolved to their satisfaction (and indeed looks like they will lose out on it).

Not sure who the victor is (EIOPA at a guess), as it is not completely clear who they are lobbying against on the "principle of market consistency"

Sr. Montalvo - "No delay to Solvency II" - sure about that?

Forgot to post this yesterday - outstanding quote from the EIOPA chief executive at the ABI's conference on the same day that the Council text was published!