The most important legislative project for Europe’s insurance industry is “Solvency II”, the major exercise by the European institutions to update the legal framework for the industry. The main aim of the framework is to ensure that insurance undertakings are financially sound and can withstand adverse events, in order to protect policyholders and the stability of the financial system as a whole. “Solvency II” replaces a patchwork of 14 existing European directives, the oldest one dating back to 1964, and introduces a modern, risk-based and principles-based system that also takes account of economic reality by addressing issues of group supervision.
The Solvency II framework directive was approved by The European Parliament and the European Council in April/May 2009. The final text was published in all official languages on 17 December 2009.
The directive is also a so-called “Lamfalussy Directive”; this means that in “level 1”, the key principles of the new system are set out in the Framework Directive while room is left for implementing measures, still at the European level, in “level 2”. Level 2 measures will be issued by the European Commission: AMICE is involved in informal consultations on drafts of these measures. The European Commission is expected to publish a formal proposal before the summer of 2011 which should, after involvement of Member States and the European Parliament, become final at the end of 2011. EIOPA, the new European Insurance and Occupational Pensions Agency, is charged with developing guidelines for the implementation of Solvency II in the Member States. Some of these will remain non-binding (under a comply-or-explain approach), others may be declared. Work on level 3 guidelines has begun at EIOPA and AMICE is also involved in preparatory consultation work in this area.
In January 2011, the Commission presented the draft for the so-called “Omnibus II Directive” which is to amend the level 1 framework directive. In addition to moving the implementation date for the Solvency II project to 1 January 2013 and making the necessary legal changes following the creation of EIOPA and the entry into force of the Lisbon Treaty, the Omnibus II Directive opens the door for essential transitional measures that the industry (including AMICE and its members) has been demanding in order to avoid an unacceptable overburdening of undertakings and serious market disturbances at the start of the new regime
Within AMICE, the work on Solvency II is carried out in the Solvency II task force of the Economic and Finance Working Group. On issues of governance, the Legal Affairs task force provides additional input. Within the scope of the project, AMICE focuses mainly on topics of particular relevance to mutual and cooperative insurers, such as
- Funding issues (e.g. surplus funds, supplementary calls for contributions, subordinated debt)
- Proportionality in particular in pillars II and III (system of governance, ORSA process, reporting and disclosure)
- Issues of particular relevance (e.g. risk-free term structure, long-tail non-life, health module, ...)
- Non-proportional reinsurance
- Groups (group definition, group benefits, governance in groups)
On other issues, AMICE cooperates closely with CEA, the European insurance and reinsurance federation, with the aim of identifying coordinated positions among Europe’s insurance industry.