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Deloitte comments on latest CEIOPS advice on Solvency II frameworkPositive and constructive but still some way to go |
Following approval by its members on 30 October 2009, the Committee of European Insurance and Occupations Supervisors (CEIOPS) delivered its final advice on the vast majority of Solvency II Level 2 Implementing Measures on 10 November, which were covered in the first and second rounds of consultation.
Rick Lester, financial services partner at Deloitte, commented: “We see the way in which CEIOPS and the industry have engaged in the development of Level 2 implementing measures as both a constructive and positive exercise, but there is still some way to go. There continue to be contentious areas such as illiquidity premium. Furthermore, whilst progress has been made on the Level 2 measures, the Level 3 guidance aimed at fostering supervisory convergence will be key to ensuring a level playing field across Europe and consistent implementation of these measures.
“The second round of consultation elicited close to 20,000 comments demonstrating the heightened interest of all stakeholders and their desire to influence the way the Solvency II framework is being implemented. A number of market participants raised comments in relation to CEIOPS’ interpretation of some provisions of the Level 1 text. It is pleasing to see that CEIOPS has acknowledged this and sought to provide solutions to ensure its final advice is in line with the Level 1 text.
“A recurring comment from stakeholders on some proposals made by CEIOPS is to consider the principle of proportionality. CEIOPS has reaffirmed that this principle applies, but impressed that this should not lead to failing to provide proper incentives for improving risk management. The application of proportionality will by its nature require judgments to be made, and to be demonstrated, by both insurers and supervisors, and this will continue to be an area of subjectivity.
“We are now entering the final round of consultation on the third set of Consultation Papers for the remaining elements of the level 2 implementation measures, which are due to be finalised in January 2010. The level of engagement from the industry has increased through the consultation rounds, in part due to the focus of the papers, but it will be important for the industry to continue to take time to digest and feed back on the most recent proposals which were published on 2 November with responses due on 11 December.
“CEIOPS has acknowledged that a full quantitative impact analysis will be required to obtain a measure of the overall impact of all the advice combined. It will be vital for the industry, having invested significant time and effort in evaluating and feeding back on the proposed implementation guidance, to play an active role in the QIS 5 exercise planned for next year which will help calibrate the impact.”
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