Key Solvency II Milestone Reached Today As Omnibus 2 Gets Stamp of Approval
Omnibus 2 – which amends Solvency II in a number of key areas including its implementation date and inclusion of transitional arrangements – has successfully passed today’s milestone vote by ECON.
Janine Hawes, Solvency II director at KPMG, commented: “Today’s vote comes as a great relief to the insurance sector and enables Solvency II to move one step closer to reality. The industry has won some important battles, including recognition of the need for a mechanism to avoid insurers being forced to sell investments due to market volatility at a time when their liabilities have not crystallised.
“However, the mechanism for achieving this is not yet fully resolved. Peter Skinner MEP acknowledged today that they do not yet have ‘all the answers’, but that the vote enables the position to move forward.
“Industry concerns relate to the stringent conditions applying to the use of these measures, which may limit their application. The Commission has already reconvened its working group on long-term guarantees to consider this issue further, which today’s vote will now make possible. We hope that this will result in a transparent and predictable mechanism that will prevent insurers from needing to hold excessive capital levels.”
Two other burning issues for insurers are whether the US will be granted temporary equivalence status and confirmation of the implementation date.
Janine Hawes continued: “The proposals for temporary equivalence have not been modified to include a process for establishing this for the US. The current text includes conditions that the US would not be able to meet. Today’s version of Omnibus 2 also maintains the one year differential between regulators gaining their powers and firms complying with Solvency II, which remains scheduled for 1 January 2014.”
Today’s ECON vote was passed by a majority vote (with 38 for, five against and no abstentions) although some clauses were rejected.
It now passes into the trilogue phase, where the European Parliament, Council of Ministers and the Commission must consider their respective drafts of Omnibus 2 and reach an agreed position to put to the Parliament plenary vote on 2 July. The first trilogue meeting has been provisionally scheduled for 11 April.
If a positive vote is reached at the first reading on 2 July, then there is a strong chance that Omnibus 2 will be able to appear in the Official Journal shortly after Parliament’s summer recess, allowing the release of the next stages of Solvency II.