A few weeks ago we wrote that the implementation of the Solvency II regulatory rules would be delayed after a new study was called for to look into and better understand the impact of Solvency II on insurers and reinsurers. At that time we had no idea whether the delay would be lengthy but observers were suggesting that it could be 2015 before any rules would be implemented. Now, another key date in the Solvency II process has been delayed, which almost guarantees nothing will be in place until 2015.
On the 20th September a spokesperson for European Commissioner Michel Barnier had said that agreement on Solvency II should wait until the impact of the rules had been assessed and reported on by EIOPA. “Making sure that EU rules favor long-term investment for our economies is key for Commissioner Barnier, as is improved risk management for the insurance industry,” said spokesperson Stefaan De Rynck.
Now we can be certain that this delay is going to push the implementation towards at the earliest the end of 2014 but more likely into 2015, after a key vote on what is known as Omnibus II, which had been scheduled for November, has now been pushed back to March 2013. Omnibus II is a key part of the Solvency II directive but the vote on the changes within Omnibus II has now been pushed back three times in total.
This latest delay is thought to be due to the impact study we wrote about the other week, it’s likely that the results from the impact study are required before any votes on any aspect of Solvency II will be undertaken. After the Omnibus II vote there are other key dates which need to be successfully passed before Solvency II can become a reality so there is still a way to go.
The insurance and reinsurance industry themselves have always thought that 2014 was going to be a difficult target for the implementation of Solvency II, now it seems almost certain to fall into 2015. Some in the industry will be pleased as they have been calling for further impact assessment to be done and for the capital rules to be sense checked. For the ILS and catastrophe bond market, it means we’ll have to wait even longer to see what, if any, impact the Solvency II rules on capital adequacy have on the way insurers and reinsurers leverage the capital markets for the transfer of risk.