Solvency II: Technical specifications must support the industry's competitiveness

The adoption of the revised Solvency II framework at the end of last year was an important milestone for insurance regulation and forms the basis for the further development of the Directive. Today, members of the Economic and Monetary Affairs Committee (ECON) discussed the technical details of Solvency II at a hearing in the European Parliament.

On the occasion of the hearing, the German Insurance Association (GDV) emphasises that a practical approach is crucial in order to support the position of German insurers internationally. The Commission, which will draft the detailed rules, focuses on competitiveness and reducing administrative burdens in its recently presented Work Programme. This goal should also be reflected in the technical rules.

Faithful implementation of the political agreement

For the insurance industry, it is vital that the secondary legislation implements the political agreement reached last year faithfully. In particular, the long-term valuation method for liabilities is a key aspect. This applies above all to life insurers, whose obligations often extend over decades. A stable valuation method is essential in order to offer long-term security to customers. It provides the necessary stability and certainty for planning.  This makes it all the more important for the European Parliament to monitor implementation closely.

Pragmatic solutions for proportionality

Under the current EIOPA proposals, insurers that do not qualify as small undertakings under Solvency II must fulfil numerous criteria in order to benefit from proportional relief. In addition to a size threshold, insurers must fulfil four general and 13 specific criteria. The GDV argues that this creates unnecessary red tape and excessive complexity.

The association favours a pragmatic approach: Instead of complex qualitative criteria, only size thresholds should apply. Within these limits, it should remain the responsibility of the national supervisors to grant proportional relief based on a company's risk profile.

IRRD: Efficiency instead of complexity

In addition to Solvency II, the Insurance Recovery and Resolution Directive (IRRD) was also discussed by the ECON Committee. With the IRRD, it is essential too that the secondary legislation reflects the previous political agreement.

The framework requires insurance companies and resolution authorities to draw up pre-emptive emergency plans. The GDV calls for the plans to prepare companies for crisis situations without burdening them with excessive red tape. In order to avoid such burdens, both the selection of companies subject to the obligations and the scope of the required plans must be carefully defined.  EIOPA intends to present the first drafts for Level 2 and 3 measures at the end of April.

Next steps

The European Commission is currently working on draft amendments to the Delegated Regulation under Solvency II. These are expected to be submitted for public consultation by the summer. The draft will then be finalised, officially adopted by the Commission and sent to the European Parliament and the Member States in the Council. The Council and Parliament will then have three months to raise objections. If no objections are raised, the measure will be published in the Official Journal and enter into force.

The procedure could be finalised by the end of the year. While the Commission relies on EIOPA's technical advice for the Delegated Regulation under Solvency II, the authority is directly responsible for drafting Level 2 and 3 measures under the IRRD.