The Solvency II Directive indicated in many places that the European Commission had powers to adopt implementing measures for specified topics.
The Omnibus II Directive amends the legal form that Solvency II Level 2 implementing measures take, to follow the regulatory structure required by the EU’s Lisbon Treaty. Legally, these take the form of Delegated Acts, Regulatory Technical Standards and Implementing Technical Standards.
Delegated acts are legislative provisions made by the European Commission which supplement a Directive. Essentially they specify in greater detail precisely how a Directive provision will operate. The Directive must explicitly grant the Commission powers of delegation, defining the objectives, content, scope and duration of the delegation.
The Commission must consult experts from Member States when preparing a delegated act, but is not bound by their opinions. The European Parliament and Council have two months (plus a possible one month extension) to consider acts and they have separate rights either to adopt or to reject them.
The Delegated Acts, which take the form of a Regulation, were adopted by the Commission on 10 October 2014. Following approval of the European Parliament and the Council of the EU, the Regulation entered into force on 18 January 2015.
Implementing technical standards
Implementing technical standards are legislative provisions made by the European Commission on the basis of advice received from EIOPA. They determine the conditions of application of delegated acts. They are purely technical and do not imply strategic decisions or policy choices.
An example of how the legislative structure is intended to work:
Solvency and Financial Condition Report (SFCR)
Article 51 requires undertakings to prepare SFCRs.
Article 53 lays down applicable principles for SFCRs.
Article 56 gives the Commission powers to adopt delegated acts, specifying the information to be disclosed and the deadlines for disclosure.
Implementing Technical Standards:
Article 56 requires EIOPA to develop draft implementing technical standards specifying the templates to be used for SFCRs. It then gives the Commission powers to adopt those implementing technical standards.
The development of level 2 implementing measures
The Commission requested advice from EIOPA on the implementing measures. EIOPA’s website has full details of its advice.
EIOPA issued 54 consultation papers on Level 2 Implementing Measures in 2009 in three tranches. Lloyd’s (working with LMA members) responded to 41 of these. Many other EU insurers and their associations also responded and made similar points to Lloyd's.
In November 2010, the Commission released draft Level 2 Implementing Measures for public consultation. Lloyd's made a submission to this consultation. Respondents' main concerns revolved around implementing measures' impact on long-term products, volatility, pro-cyclicality, proportionality as well as limiting the reporting burden and the need for transitional measures in certain areas.
Following publication of its first set of consultations in April 2014, EIOPA issued the first set of draft Implementing Technical Standards (ITS) in October 2014. As required under Solvency II, this was submitted to the Commission for endorsement. The Commission adopted them in March 2015.
EIOPA provided advice to the Commission on the second set of ITS in July 2015, following a public consultation. The Commission adopted these in November 2015.
The European Commission adopted the third group of ITS in December 2015.
Further details can be found on the European Commission's website.
Our Solvency II glossary simplifies some of the key terms relating to Solvency II.