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...

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 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...

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...

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!

Omnibus II - back to October 2013

Following on from the barely noticeable number of previous posts on Omnibus II Plenary vote delays (here, here, here, here, here and here), we can now stick lucky number 7 in the pot, after the procedure file was updated today to show a postponement to October 2013 - whilst the delay was inevitable after EIOPA made it clear that the Long Term Guarantees Assessment report would only reach the co-legislators by July, the actual date helps with short-term planning for all stakeholders concerned.

I guess the big questions that emerge from a delay to October are:

• Whether it is enough time, factoring in the summer holidays, to consume the LTG report, acknowledge its outcomes regardless of which territory benefits most from the conclusions, and vote positively
• Whether it is actually too much time to pull apart the report's outcomes, and between the trilogue parties, industry lobbyists and any national political pressures than can be marshalled in the interim, October just becomes the next promises graveyard.
• The increasing proximity of this date to the campaigning for the 2014 EU parliamentary elections, which must surely impact on how the voting will go if the LTG report gives a duff outcome to those countries still writing swathes of guaranteed business
• The entry into the mix of Karel van Hulle's replacement (haven't seen a name yet)

Not certain if 2016 is exactly riding on Omnibus II approval by October, but one feels it would certainly help restore some credibility.

EIOPA's Long Term Guarantees assessment - long time coming

So EIOPA have finally released the specifications for the Long Term Guarantees assessment (press release here), the second most eagerly awaited release this year behind Kate and Will's baby. Relatively straightforward timetable of events expected by EIOPA it would appear;

• End of March - completed templates submitted to national regulator
• April and May - national regulator and EIOPA will analyse and synthesise results
• Second half of June - technical results to be provided by EIOPA to the trilogue parties
• Mid-July - report provided by the Commission to the co-legislators

I am stressing the second half due to the current procedure file for the Omnibus II Parliamentary Plenary session pointing at a 10th June date, which is of course too early to consider that report in making a decision on Omnibus II. That leaves one more Plenary window in July before the summer recess, so we can probably bank on a postponement to September at the very least, particularly as the report is bound to contain more contentious bones than a frozen beefburger...

A few things of note in the suite of materials published by EIOPA today, of which the presentation slides are perhaps most useful;

• Objectives of the assessment include "possible competition distortions" and "impact on long-term investment", which have surely topped the list of differences between trilogue parties and indeed individual countries to date.
• Predominantly based on YE 2011 balance sheet, but will test pre and post financial crisis positions as well (2004 and 2009)
• Can optionally use internal models for capital and risk margin calculation, provided the entity is in a national IMAP.
• At least 50% of Life non-linked TPs and 20% of Non-Life TPs in each country must be covered (hence the industry has been quite vocal about doing this at financial year-end!)
• 13 scenarios included in the assessment, of which one does not include any of the proposed measures - not sure if that reduced quantum addresses the concerns of the FSA's Insurance Standing Group back in September, when the number sat at 18.

The main meat in today's releases are of course for the digestion of your friendly local actuaries and accountants - best of luck!

EIOPA, Parliament, IRSG and LTGs - momentum sustained?

I guess I should start with a Blein Vie Noa to one and all - after a relaxing few weeks in France I am now back on the beautiful Isle of Man sizing up opportunities for 2013 and beyond.

I didn't expect I would be missing much over the festive period and, other than the FSA sacking-off their proposed January IMAP industry briefing in favour of a (yet to be delivered) letter, things did go quiet. Freshfields kindly filled some airtime by pulling together another of their "where are we now" summaries that remain excellent (and free) materials that I would recommend punting on to your non-executive directors.

Luckily the noisemakers got back in the game as soon as school restarted, focused largely on the content of EIOPA's Insurance and Reinsurance Stakeholder Group's minutes. This meeting was held in October, so in terms of new news, it is right up there with "Earth is not flat". That said, we don't all have access to the inside track before publication of such materials, so it was interesting to pick through the doc for steers. I noted the following;

• Continuing problems with terms of reference for the LTG assessment (indeed the LTG sub-group note on p7 that there isn't even a EU-consistent definition for LTG!) - still looking like it will impact on the designated Plenary session for Omnibus II due to a combination of last minute delivery of the technical specifications to the industry itself as well as the output report to the Parliament, who themselves were reported today as being less than impressed with the final TORs. The potential number of scenarios in the assessment also clearly remains a sore point.
• Acknowledgement that "Autumn 2013" is now "best case scenario" for Omnibus II adoption, though, according to van Hulle at the last EIOPC meeting, the Commission and Parliament remain almost diametrically opposed on what should materialise at Level 1 and Level 2 (full minutes from EIOPC here)
• Confirms the ex-ante approach is favoured by Parliament and Commission (significance covered by Gideon here), and that Parliament have no wish to commit to an implementation timescale.
• The Council members are being "heavily lobbied", fostering implementation uncertainty.
• Attending stakeholders supported a definitive 2016 date.
• The IRSG's Governance sub-group flag up consistency issues around Fit and Proper regs as well as the "AMSB" term that I'm sure we have all had practical issues with over the last 2 years!
• Proportionality remains a "main concern" for mutuals, as well as smaller insurers - despite having a designated sub-group, any substantive guidance on applying the proportionality principle looks a distant prospect at best.
• Astonishingly, minutes from May 2012 could not be approved due to EIOPA's "workload" - small instance of an institutional tardiness problem?

Whether or not the industry is losing it's appetite for the Solvency II banquet, when you check out EIOPA's workplans for the next couple of years, at least one body will be filling its face!

Another interesting piece came out in the last week, when InsuranceERM pushed out the findings of a Solvency II roundtable (no sub required), bringing in a few UK-based CROs and the like, ostensibly to chew over the loss of momentum in the project. A few noteworthy bits jumped out;

• Solvency II balance sheet appears to be off the agenda for ICA+, for both regulator and industry
• Perception that, with the transition of regulatory "ownership" to the Bank of England, there is a decreased likelihood that the industry will be able to use Solvency II as a capital release mechanism
• A suggestion that the FSA was more minded towards EIOPA's opinions than the industry's during IMAP 1.0, something which has seemingly reversed with the advent of ICA+

One certainly hopes that the UK industry and regulator can make a decent fist of this indeterminate transition period without having to break the bank...

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 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...

Omnibus II - Plenary vote delayed by 3 months

The worst kept secret has finally been revealed, namely that the EU Parliament's Plenary session to clear Omnibus II has been postponed by 3 months to July (good spot Gideon) - obviously makes that session more of a coronation if they are going to get it cleared before the summer holidays, so lets hope the guys in ECON get their job done later this month and the 'Trialogers' don't waste too much time between then and July.