26 November 2009

‘Solvency II – a winning recipe?’ Panel I at the CEIOPS 2009 Annual Conference

Socialist MEP Peter Skinner presented the international perspective on the equivalence of third-country solvency regimes. He said that the US was posing particular challenges in this respect, while the Swiss regime, with its relative comparability to the Solvency II regime, would be less challenging.

Pauline de Chatillon (Chair of CEIOPS' Solvency II - Financial Requirements Expert Group; Director of International Department ACAM) chaired the panel devoted to Solvency II. She explained that, while the focus of Solvency II was on the insurance undertakings’ own responsibility for identifying, measuring and managing risks, the main aim of the new standards was to deepen the integration of the (re)insurance market and achieve convergence in supervisory approaches. The development of Solvency II was the result of constructive dialogue and effective teamwork led by the European Commission.

 

Karel Van Hulle (Head of Unit, Insurance and Pensions, European Commission) emphasised the need to continue the dialogue in the run-up to the implementation of Solvency II in 2012. The Commission’s role in this interactive process would be to listen to all parties involved and to draw the necessary conclusions, taking advantage of the flexibility in the law-making process afforded by the Lamfalussy structure.

 

The views of the European insurance industry were represented by Alberto Corinti (Deputy Director General and Director Economics and Finance, CEA), Jean-Christophe Menioux (Chief Risk Officer, AXA Group; Vice Chairman, CRO Forum) and Gregor Pozniak (Secretary General, AMICE).

 

Corinti reiterated strong industry support for Solvency II - the industry was busy preparing for the challenges of the new regulatory framework. However, he also stated that CEIOPS had been too prescriptive and conservative in its advice on Level 2 implementing measures to the Commission. He stressed the importance of adhering to the principle-based and economic approach of the Level 1 text and urged CEIOPS to strike the right balance in defining financial requirements. Pozniak outlined the specificities of mutual and cooperative insurance undertakings which needed to be taken into account in the development of Solvency II. These included the business model specific to mutuals, characterized frequently by only regional operations and restricted possibilities to raise capital or to diversify. Menioux commented that the standard formula for solvency capital requirements was very close to an internal model. Therefore, the admissibility requirements for internal models should not be disproportionately higher than those for the standard formula or ‘the standard model’, in order to keep a right incentive to develop internal models.

 

Peter Skinner (Rapporteur for Solvency II Directive, European Parliament) presented the international perspective on Solvency II. He provided some insight into future Commission decisions on the equivalence of third-country solvency regimes, for which CEIOPS was currently drafting criteria. In his view, equivalence assessments could only be undertaken on a country-by-country basis. The US was posing particular challenges in this respect, while the Swiss regime, with its relative comparability to the Solvency II regime, would be less challenging.

 

Issues raised by the audience included the sustainability of the fair value valuation in Solvency II, the benefits of the equivalence mechanism, the role of regulation, the difference between banks and (re)insurance undertakings as regards capital needs and the impact of Solvency II on the structure of the market.

 

Ms. de Chatillon concluded by reminding the audience that the success of Solvency II was not only about finding the right answers, but also about asking the right questions.

 

Press release

 

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