Policy makers in Brussels have finally struck a deal on the Omnibus II directive, the legislation underpinning Solvency II, that will pave the way to completing one of the most challenging pieces of legislation to hit the insurance sector.
The main features of the deal are:
- Long-term guarantees (LTG), which will reduce volatility of net assets in times of market distress.
- Enhanced requirements for risk management, supervisory review process and public disclosure.
- A phasing-in period of 16 years from Solvency I to Solvency II.
Peter Ott, European Head of Solvency II at KPMG, commented: ‘European policymakers have finally managed to agree on an Omnibus II package, allowing the European Parliament vote in February to proceed. It is very clear that all parties have moved from their original negotiating positions, and the final package is likely to be welcomed by insurers as a significant improvement to previous proposals and a workable solution.’
PwC partner and SII leader, Charles Garnsworthy, commented: ‘Agreement yesterday between the European Council, European Parliament and Commission will give the market a degree of rule certainty, but will also allow European Insurance and Occupational Pensions Authority (“EIOPA”) to finalise its own drafting on delegated acts and regulatory technical standards.
‘The compromise reached will not satisfy all parties entirely, however it will represent relief for many, especially now that the way forward has become clearer.
The provisional agreement reached with the European Parliament will have to be endorsed by EU member states before being finalised. Solvency II will become operational from January 1 2016.
Read more about Solvency II in the news.