13 Financial services: insurance and
reinsurance
| (35378)
14513/13
COM(13) 680
| Draft Directive amending Directive 2009/138/EC on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) as regards the dates of transposition and application and the date of repeal of certain Directives
|
| Legal base | Articles 53(1) and 62 TFEU; co-decision; QMV
|
| Document originated | 2 October 2013
|
| Deposited in Parliament | 7 October 2013
|
| Department | HM Treasury
|
| Basis of consideration | EM of 23 October 2013
|
| Previous Committee Report | None
|
| Discussion in Council | Not known
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
13.1 Directive 2009/138/EC, known as Solvency II, is intended
to provide a modern, risk-based system for the regulation and
supervision of EU insurance and reinsurance undertakings.
13.2 In January 2011, the Commission issued a proposal,
known as Omnibus II,[25]
to amend the Solvency II Directive (and the Prospectus Directive)
in order to reflect certain changes brought about by the Lisbon
Treaty and the creation of the European Insurance and Occupational
Pensions Authority. The proposal also included transitional provisions,
hooks for detailed subordinate legislation (known as level 2 measures)
and provisions to extend the transposition, repeal (of the present
existing insurance and reinsurance Directives collectively referred
to as Solvency I) and application dates in Solvency II.
13.3 Solvency II cannot become properly operative
until the Omnibus II package is adopted. In September 2012 Directive
2012/23/EU (a so-called Quick Fix Directive) was adopted to extend
the deadline for transposition of Solvency II to 30 June 2013
with application on 1 January 2014, together with repeal of Solvency
I on the latter date, because negotiation of Omnibus II had been
very slow.
13.4 Omnibus II has still not been adopted ¯
negotiations have proved difficult and the trilogue parties have
been unable to reach agreement on the overall package, most notably
on the capital treatment of long-term insurance products. Consequently,
it is evident that there will not be enough time formally to adopt
and bring Omnibus II into force before 1 January 2014, when the
unamended Solvency II Directive starts to apply.
The document
13.5 Without legislation to further postpone the
current transposition and application dates, Solvency II will
apply unamended and will need to be implemented urgently without
transitional rules and other important elements contained within
Omnibus II. So the Commission presents this draft Regulation solely
to amend the transposition date of Solvency II to 31 January 2015,
with it coming into force, together with repeal of Solvency I,
on 1 January 2016. This timetable would provide firms and supervisors
with 11 months to prepare for implementation of Solvency II, that
is a "bifurcation period" of 11 months after the transposition
deadline before the Solvency II measures start to apply.
13.6 In presenting the proposal the Commission says
that:
· this
change to the implementation timetable should also ensure that
there is time for the level 2 measures, which will set out more
of the detail on how Solvency II should be implemented, to be
completed before it comes into force;
· the
level 2 measures cannot be proposed until Omnibus II is agreed
and published (because they would be proposed under powers which
will only be introduced into Solvency II as part of the Omnibus
II package of amendments); and
· supervisors
and firms need sufficient time to prepare for the application
of Solvency II after the framework is finalised (including the
level 2 measures and the national transposition measures).
The Government's view
13.7 The Financial Secretary to the Treasury (Sajid
Javid) says that the Commission's proposal reflects widespread
recognition that the dates currently in the Solvency II Directive
are not achievable and that amendments are therefore necessary.
13.8 Noting that the current transposition date for
Solvency II is 30 June 2013, the Minister reports that:
· the
Commission gave oral assurances ahead of the 30 June deadline
that it was not expecting Member States to comply with this deadline;
· it finally
gave written assurances to Member States, in a letter of 3 July,
that it "does not envisage opening infringement proceedings
for failure to transpose Solvency II before the outcome of [Omnibus
II] trilogues is clear"; and
· so far
as the Government is aware, no Member State has complied with
the 30 June transposition deadline.
13.9 The Minister comments that:
· the
Government is in favour of the proposed Directive as further delays
to the Solvency II timetable would be an undesirable outcome for
firms in the insurance industry who would incur significantly
increased costs;
· there
would also be a significant degree of legal ambiguity for supervisors,
firms and Member States in the event that this proposal is not
adopted, which would lead to confusion and uncertainty around
how to implement Solvency II, as it would come into force without
political agreement on the overall framework;
· the
Government believes that a bifurcation period of nine months (starting
from 1 April 2015) would have been sufficient and would have allowed
greater time for the development of level 2 measures;
· it is
important for a degree of time pressure to remain on the overall
level 2 process, particularly given the widespread expectation
that Solvency II will now apply from 1 January 2016; and
· the
proposal needs to be adopted prior to 1 January 2014 in order
to avert potential cost and confusion and the consequent financial
burden on affected firms.
Conclusion
13.10 Clearly the implementation dates for Solvency
II need to be amended and so we clear this document, whilst drawing
it to the attention of the House, both in relation to the situation
of Solvency II itself and to that of Omnibus II.
25 See (32459) 5523/11: HC 428-xvii (2010-11), chapter
13 (16 February 2011). Back
| 
