The latest postponement of the European Parliament's critical vote on Omnibus II could undermine the negotiations to finalise the Omnibus II Directive and ultimately damage the international reputation of Solvency II, experts warn.
The latest postponement of the European Parliament’s critical vote on Omnibus II could undermine the negotiations to finalise the Omnibus II Directive and ultimately damage the international reputation of Solvency II, experts warn.
The parliament’s plenary vote on Omnibus II has been pushed back to November 20. It had previously been scheduled to take place on October 22 after being postponed from September 10 following a failure to reach agreement on the final draft of Omnibus II in the trilogue negotiations between European policy-makers.
The vote is a crucial step in finalising Omnibus II and setting the level 1 framework for Solvency II, which will enable the regime’s detailed rules to be finalised.
The delay fuelled concerns that the implementation of the Solvency II regime on January 1, 2014 may no longer be feasible and prompted calls for a clear timetable to be laid out for the remaining steps in adopting the regime.
“The timetable is clearly under a huge amount of pressure,” says Paul Clarke, global Solvency II leader at PricewaterhouseCoopers (PwC) in London. “If everything were to work perfectly after [the vote in] November, you can just about imagine implementation happening in 2014.”
The delay could also be used by Solvency II’s detractors to reopen issues that had been agreed in the ongoing trilogue negotiations on Omnibus II in order to hamper the development of the regime, Clarke warns.
“[The delay] allows back on the table other issues that in theory have been resolved already, allowing those who are generally opposed to Solvency II in whole or part to mobilise against the initiative.”
While national regulators, such as the FSA, said they were still aiming for a January 1, 2014 implementation date, insurers will find it increasingly hard to achieve this deadline given the continued uncertainty over the final rules, says Janine Hawes, insurance director at KPMG in London.
“It is becoming increasingly unrealistic to expect all insurers to be able to achieve this [deadline], especially as the final requirements for the determination of insurance liabilities remain unclear,” Hawes says.
“Companies need the certainty of having final rules in order to properly prepare for the new requirements. At the moment, there simply isn’t enough time for everyone to do this properly,” she adds.
The deadline for national regulators to transpose the Solvency II Directive into national law has already been postponed by six months to 30 June, 2013 due to delays in finalising Omnibus II.
The continued delays could lead to Solvency II being soft-launched, some commentators suggest. “Perhaps the rules won’t be so stringently enforced, and insurers will be given some leeway in applying the regulation,” says Clara Hughes, London-based senior director for insurance at Fitch Ratings.
But the continued political wrangling over the regime could damage the reputation of Solvency II outside Europe, suggests Clarke at PwC. “There is a realistic chance that Solvency II could become an industry benchmark but, if Europe can’t get its act together, it’s more likely we’ll have a fragmentation of approach [to global regulation],” he adds.
This article was first published on Risk