Solvency II in threat of being sidelined, warn chiefs

Solvency II is in threat of being sidelined as some of the EU’s biggest member states get ready to introduce parts of the new directive themselves, industry bosses have warned.

The implementation of the new regime has already been delayed to 1 January 2014 but it may not come into force now until 2016, say the insurance chiefs, according to a Bloomberg report.

The first hurdle that has to be overcome is the plenary vote on Omnibus II, a package of key changes to Solvency II, which was pushed back from 20 November to 11 March 2013, pending the results of an impact study into the proposed long-term guarantee package.

European insurers are meeting in Frankfurt today as German and Dutch regulators consider whether to introduce elements of the new rules themselves, thus jeopardising the EU’s attempts to create a level playing field.

Among those at the table will be Munich Re chief executive Nikolaus von Bomhard and Generali’s chief insurance officer Sergio Balbinot.

Meanwhile policymakers have questioned Solvency II’s use of insurers’ own risk models, a method used by banks that helped trigger the financial crisis.

Allianz SE chief financial officer Oliver Baete said: “The biggest risk we see at the moment is balkanisation, with each country introducing their own changes to the rules.

“This can’t be in the interest of Europe and it’s certainly not in the interest of Allianz.”

Two days ago, Burkhard Balz, a German lawmaker in the European parliament and member of the Economic and Monetary Affairs Committee, wrote in an email: “With the financial and debt crisis, national interests gained more and more importance.

“We need a credible and realistic timetable.”

The European Insurance and Occupational Pensions Authority (EIOPA), the EU agency tasked with drafting Solvency II before it is approved by the European parliament, said there was a risk countries would regulate unilaterally due to the delay.

EIOPA’s executive director Carlos Montalvo wrote in an email: “To prevent the unintended consequences of national solutions, namely lack of convergence and harmonisation, we need joint work.

“We are approaching the delay as an opportunity for better preparation and not as an excuse not to do anything.”

FSA director of insurance Julian Adams said in a speech in London last month that insurers would be allowed to use their own internal models to calculate capital reserves. At the same time, the FSA granted them more time to prepare for Solvency II in anticipation of further delays to its implementation.