Solvency II: Progress on Level 2
Development of the Solvency II implementing measures is picking up pace as the next deadline approaches.
Following agreement on Omnibus II, the focus for European law makers at the beginning of 2014 is on developing the implementing measures for Solvency II. Implementing measures are detailed provisions which set out the specific requirements under Solvency II. They are also known as ‘Level 2’ measures.
Solvency II implementing measures take the legislative form of “delegated acts”. These are legislative provisions adopted by the European Commission in accordance with the Solvency II directive, which will supplement the directive and specify in greater detail how Solvency II will operate.
The measures were drafted by the Commission, in line with advice from the European Insurance and Occupational Pensions Authority (EIOPA). The Commission is working to finalise the draft delegated acts by April 2014, so they can be sent to the European Parliament and Council for consideration in the summer, after the European elections. The Parliament and Council will have three months (plus a possible three month extension) to reject or approve the delegated acts. Parliament and Council must accept or reject delegated acts as a whole: once the acts have been formally referred to them they cannot suggest amendments. It is therefore considered unlikely that the acts will be rejected, as this would impact the legislative timetable.
The Commission is reluctant to accept amendments to the draft delegated acts, in part because the legislative timetable is tight. It has indicated that it will consider only a limited number of amendments, and these must have significant member state support.
The Commission held a member state expert group meeting on 28 January 2014 to discuss and provide feedback on the draft acts. The group was given a deadline of 12 February to submit written comments on the drafts with proposed solutions and wording amendments where necessary.
National associations and industry bodies have been working together to agree a list of key concerns and proposed amendments to be put forward by the expert group for consideration. A further expert meeting is scheduled for late March and the Commission is hoping this will also be the last.
While much of the discussion on delegated acts is focused on matters such as the long-term guarantee package and long-term investments, which are of limited interest to non-life insurers, the delegated acts are overall of significant interest to Lloyd’s. We have been actively involved in industry discussion of proposals put forward to the expert group and are monitoring developments in this area very closely.
Once the Commission has agreed the draft delegated acts, for approval by the Parliament and Council, attention will shift to the development of regulatory technical standards (RTS) and implementing technical standards (ITS). These are additional supplementary provisions which are technical in nature. The RTS, ITS and corresponding guidelines will be drafted by EIOPA and subject to public consultation.
We expect a first consultation on RTS and ITS in the second quarter of 2014, with further consultations scheduled for later this year. EIOPA will submit its first set of technical standards to the Commission in October 2014. EIOPA has published a full timeline, which can be found on its website.
Lloyd’s is continuing to monitor developments and will provide further details of the consultations on the Government Affairs pages of lloyds.com once they are available.