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Solvency IISolvency II: almost there: almost thereIIS 43RD Annual SeminarIIS 43RD Annual Seminar

Berlin 9 July 2007Berlin 9 July 2007

Karel VAN HULLEHead of Unit, Insurance and Pensions, DG Markt,

European Commission

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Proposal for a Framework DirectiveProposal for a Framework DirectiveJuly 10th 2007July 10th 2007

Recast

&

Codification

Codification &

New Articles

+ Solvency II13 existing Insurance Directives (direct

insurance, reinsurance, groups etc.)

= 1 Directive ‘EU Insurance sourcebook’

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Solvency II – 4 Principal ObjectivesSolvency II – 4 Principal Objectives

• Deepen the Single Market

• Enhance policyholder protection

• Improve (international) competitiveness of EU insurers

• Further Better Regulation

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• Introduces an economic risk based approach that will Introduces an economic risk based approach that will reward good risk management and enhance reward good risk management and enhance policyholder protectionpolicyholder protection

• Places emphasis on the responsibility of senior Places emphasis on the responsibility of senior management to manage their business responsibly management to manage their business responsibly

• Fosters and demands greater supervisory Fosters and demands greater supervisory convergence across the Communityconvergence across the Community

• Takes account of international developments (IAIS, Takes account of international developments (IAIS, IASB)IASB)

The new regime…The new regime…

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Legislative Process - Lamfalussy

Level 1: Framework Directive

Level 2: Implementing Measures

Level 3: Convergent implementation assisted by close co-operation between national

authorities

Level 4: Rigorous enforcement of Community legislation by the Commission

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Many players & stakeholders in the process…Many players & stakeholders in the process…

• Solvency II was developed bottom up and not top down following intensive consultation & dialogue with– Industry (CEA/AISAM/ACME/CRO/CFO)– Professionals (e.g. actuaries)– Supervisors: Committee of European Insurance and

Occupational Pensions Supervisors (CEIOPS)– Member State Experts

• European Parliament and Council of Ministers negotiate and have final say over the Directive that will be proposed by the Commission

• Implementation by Member States and by all EU insurance and reinsurance undertakings

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• Key element of Better Regulation

• QIS 3 April – June 2007

• Analysis and conclusions from QIS3 will be published in October 2007

• Results will feed into negotiations, changes to high-level framework if necessary

• QIS 4 will take place in 2008 following consultation with stakeholders

• QIS4 will feed into development of implementing measures

Quantitative Impact StudiesQuantitative Impact Studies

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Solvency II timetable for 2007-2011

Directive development (Commission)

CEIOPS work on technical advice necessary for implementing measures / supervisory convergence / preparation for

implementation / training & development

QIS 1

2005 2006 2007 2008 2009 2010 2011

Directive adoption ?(Council & Parliament)

Implementation ?(Member states)

QIS 2

July 2007 Solvency II Directive published

QIS 3

Commission preparatory work on possible

implementing measures

Adoption of Implementing

measures

QIS 4

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Solvency II – Objective:Solvency II – Objective:

… … modern, innovative and modern, innovative and liberal regime for the liberal regime for the

prudential supervision of prudential supervision of insurers, based on sound insurers, based on sound

economic principles…economic principles…

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Issues of particular importanceIssues of particular importance

• Relationship between MCR and SCR• Impact assessment and further impact studies• Treatment of small and medium sized enterprises• Group supervision• Investment in equity• Solvency regime for pension funds• Level of detail of the Framework Directive• Treatment of third country insurers and reinsurers

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• CEIOPS has done a tremendous job in helping the Commission to shape the project and will continue to be a privileged partner advising the Commission

• From a legal point of view, no formal implementing measures can be drafted before the Directive has been adopted

• A work programme on Solvency II will have to be agreed between the Commission and CEIOPS with a clear prioritisation

• CEIOPS will also be asked to help in the assessment of the likely impact of the proposed follow-up measures

Role of CEIOPSRole of CEIOPS

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• Will continue to be closely involved in the elaboration of the project

• Ideally, industry should operate in unity and not in diversity

• Concentrate on the essence in order to keep the momentum

• Active participation in the discussion of the results of QIS 3 and the preparation of QIS 4

Role of the industryRole of the industry

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ConclusionConclusion

• Solvency II is all about improving risk management and rewarding already existing good practice

• Updating risk managment processes and practices into a company takes time

• Insurers need to start preparing now, if they do not want to be caught out when Solvency II comes into force

• The future belongs to those who prepare for it now