As an industry which protects consumers, who can encounter financial difficulties if an insurer becomes insolvent and is unable to pay claims, the insurance sector (along with banking) has always been subject to more regulatory requirements than other sectors of the economy.
Until the end of 2010, national regulators supervised the insurance sector in the EU. The national regulators were brought together at the EU level in the Committee of European Insurance and Occupational Pension Supervisors (CEIOPS). CEIOPS advised the European Commission on drafting measures to implement the EU's directives and regulations in the areas of insurance and occupational pensions. It also issued supervisory standards and guidelines to apply the regulations more effectively and worked to encourage co-operation between national supervisors in the EU.
Since 1 January 2011, as part of the EU's response to the financial crisis, CEIOPS has been transformed into the European Insurance and Occupational Pensions Authority (EIOPA), with stronger powers. EIOPA aims at upgrading the quality and consistency of national supervision, strengthening the oversight of cross-border groups and establishing a single European rule book applicable to all EU insurers In order for EIOPA to carry out its new role effectively, some further technical changes to EU legislation are required. The European Commission published its proposal (the Omnibus II Directive) to implement these changes in January 2011.
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Recent developments/current issues
The solvency margin is the minimum excess of an insurer's assets over its liabilities set by regulators. A limited reform of EU-wide solvency requirements ("Solvency I") was approved in 2002. After lengthy discussion, a framework directive setting out new solvency rules ("Solvency II"), which take more account of modern risk management techniques and prudential standards, was adopted by the European Council and the European Parliament in November 2009.
There have been a series of delays in approving the legislative measures required to implement Solvency II. In July 2012, an EU Directive was adopted delaying the date that firms would have to implement Solvency II to January 2014.
The European Parliament has rescheduled again its plenary vote on the Omnibus II directive, which will adapt the Solvency II directive to take account of changes in the EU’s institutional structure and will also set the date of entry into force of the Solvency II regime. According to the Parliament’s latest forecast the vote on Omnibus II is now scheduled for October 2013. The delay is linked to the possible need to amend the Omnibus II directive in order to take account of the effects of Solvency II on insurance products with long-term guarantees. EIOPA launched a study into this issue in January 2013, aiming to publish the results in June 2013.
The repeated postponement of the vote in the European Parliament has led to widespread speculation that the date of full implementation of Solvency II will have to be postponed beyond 2014, perhaps to 2016.
The website of the European Insurance and Occupational Authority (EIOPA), the successor body to the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS), can be found here.
The framework directive on Solvency II (published in the EU’s official journal in December 2009) can be found here.
Presentations for download
The following materials were presented at CFRR events and provide additional information on insurance regulation. The most recent presentations contain the most up to date information. While the CFRR tries to ensure that this material is as up to date as possible, some of the content, especially in the earlier presentations, may not reflect the latest developments. Presentations in languages other than English are available for the materials given at GDLN events - please follow the link to the webpage of the original event to find these materials.
Right click or option-click the link and choose "Save As..." to download these files.
These two presentations were given at the GDLN event for the IFRS for Prudential Regulators group held on 6 June 2011. The first presentation compares the disclosure requirements of Solvency II with those of the IFRS 7 reporting standard. The second summarizes the slightly differing approaches to valuation in Solvency II and the IFRS 4 reporting standard in both its Phase I and Phase II forms.
This presentation, which gives a brief overview of developments in bank and insurance regulation in 2010, was given during a GDLN event organized for the IFRS for Prudential Regulators group on 15 December 2010.
Solvency II Shamim Diouman
Mr Dioumam outlines the progress made in the EU's new more risk-based system for regulating the capital adequacy of insurance undertakings (Solvency II). He draws out the similarities between the Basel III rules and Solvency II and emphasizes the importance of the disclosure requirements in the new system.
Technical Update for Banking and Insurance Regulators Shamim Diouman
1. Overview and update on financial reporting and other related issues 2. Update on accounting for financial instruments and Basel III for banking regulators 3. Update on accounting for insurance contracts and Solvency II for insurance regulators