Solvency II requirements published

On 25 November 2013 the Council of the European Union published the likely final compromise text of the Omnibus II. The publication of this text follows the conclusion of the technical debate at the Trilogue meeting of 13 November 2013 and provides clarity on some of the key requirements of the Solvency II regime.

Below is a summary of some of the key areas where Omnibus II will amend Solvency II’s requirements which we cover in more detail in this Hot Topic:

  1. Further clarification on the Long Term Guarantee Package (see our previous Hot Topic Agreement reached on long term guarantee package).
  2. Potential for easing the regulatory reporting requirements for smaller insurers.
  3. Provisional ‘equivalence’ of third countries.
  4. Transitional arrangements and phasing in.
  5. Extension of the recovery period for a breach in the SCR and raising of the floor of the MCR

The European Parliament is currently scheduled to vote in plenary to approve the text in February 2014. Following approval by both the Parliament and Council the Directive will be published in the Official Journal (likely to be May 2014) and become part of EU law.

Omnibus II confirms that the implementation date of Solvency II will be 1 January 2016 and requires Member States to transpose the Directive’s requirements into national law by 31 March 2015. National supervisors will be given the legal power to grant approvals in areas such as internal models and ancillary own funds from 1 April 2015.

The Commission and EIOPA will be producing a lot of subsidiary legislation (in the form of delegated acts and technical standards) over the course of the next two years which will specify detailed requirements on many areas of Solvency II. It is important to keep up with the oncoming avalanche of information as being prepared will be key to a successful implementation.