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Solvency II : almost there IIS 43RD Annual Seminar Berlin 9 July 2007

Solvency II : almost there IIS 43RD Annual Seminar Berlin 9 July 2007. Karel VAN HULLE Head of Unit, Insurance and Pensions, DG Markt, European Commission. Proposal for a Framework Directive July 10th 2007. 13 existing Insurance Directives (direct insurance, reinsurance, groups etc.).

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Solvency II : almost there IIS 43RD Annual Seminar Berlin 9 July 2007

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  1. Solvency II: almost thereIIS 43RD Annual SeminarBerlin 9 July 2007 Karel VAN HULLE Head of Unit, Insurance and Pensions, DG Markt, European Commission

  2. Proposal for a Framework DirectiveJuly 10th 2007 13 existing Insurance Directives (direct insurance, reinsurance, groups etc.) + Solvency II Codification & New Articles Recast & Codification = 1 Directive ‘EU Insurance sourcebook’

  3. Solvency II – 4 Principal Objectives • Deepen the Single Market • Enhance policyholder protection • Improve (international) competitiveness of EU insurers • Further Better Regulation

  4. The new regime… • Introduces an economic risk based approach that will reward good risk management and enhance policyholder protection • Places emphasis on the responsibility of senior management to manage their business responsibly • Fosters and demands greater supervisory convergence across the Community • Takes account of international developments (IAIS, IASB)

  5. Legislative Process - Lamfalussy Level 1: Framework Directive Level 2: Implementing Measures Level 3: Convergent implementation assisted by close co-operation between national authorities Level 4: Rigorous enforcement of Community legislation by the Commission

  6. Many players & stakeholders in the process… • Solvency II was developed bottom up and not top down following intensive consultation & dialogue with • Industry (CEA/AISAM/ACME/CRO/CFO) • Professionals (e.g. actuaries) • Supervisors: Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) • Member State Experts • European Parliament and Council of Ministers negotiate and have final say over the Directive that will be proposed by the Commission • Implementation by Member States and by all EU insurance and reinsurance undertakings

  7. Quantitative Impact Studies • Key element of Better Regulation • QIS 3 April – June 2007 • Analysis and conclusions from QIS3 will be published in October 2007 • Results will feed into negotiations, changes to high-level framework if necessary • QIS 4 will take place in 2008 following consultation with stakeholders • QIS4 will feed into development of implementing measures

  8. Solvency II timetable for 2007-2011 2011 2010 2006 2007 2008 2009 2005 Directive adoption ? (Council & Parliament) Implementation ? (Member states) Directive development (Commission) CEIOPS work on technical advice necessary for implementing measures / supervisory convergence / preparation for implementation / training & development Commission preparatory work on possible implementing measures Adoption of Implementing measures July 2007 Solvency II Directive published QIS 1 QIS 2 QIS 3 QIS 4

  9. Solvency II – Objective:… modern, innovative and liberal regime for the prudential supervision of insurers, based on sound economic principles…

  10. Issues of particular importance • Relationship between MCR and SCR • Impact assessment and further impact studies • Treatment of small and medium sized enterprises • Group supervision • Investment in equity • Solvency regime for pension funds • Level of detail of the Framework Directive • Treatment of third country insurers and reinsurers

  11. Role of CEIOPS • CEIOPS has done a tremendous job in helping the Commission to shape the project and will continue to be a privileged partner advising the Commission • From a legal point of view, no formal implementing measures can be drafted before the Directive has been adopted • A work programme on Solvency II will have to be agreed between the Commission and CEIOPS with a clear prioritisation • CEIOPS will also be asked to help in the assessment of the likely impact of the proposed follow-up measures

  12. Role of the industry • Will continue to be closely involved in the elaboration of the project • Ideally, industry should operate in unity and not in diversity • Concentrate on the essence in order to keep the momentum • Active participation in the discussion of the results of QIS 3 and the preparation of QIS 4

  13. Conclusion • Solvency II is all about improving risk management and rewarding already existing good practice • Updating risk managment processes and practices into a company takes time • Insurers need to start preparing now, if they do not want to be caught out when Solvency II comes into force • The future belongs to those who prepare for it now

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