 By Tim Edwards, Director, Insurance and Investment Management, PwC
Solvency II. It just won’t go away. Although for most UK firms continued delays have meant it has slipped down their list of priorities, there is a high chance that it will be back towards the top of the agenda in the very near future. This is the first of a series of articles aimed to help insurers get Solvency II back on track.
With most firms having either slowed down, or simply mothballed their Solvency II preparations since late 2012, there is a real risk of having to re-accelerate activities through 2014. Political agreement is looking more likely by the week, particularly with EIOPA, the Europe-wide regulator, releasing their report on Long Term Guarantees on Friday. This has been the main barrier to agreement to the Solvency II Directive, which therefore is likely to be agreed this autumn, with a 2016 start date.
EIOPA has anticipated this, and is looking to accelerate the industry’s preparations for implementation. We are towards the end of a consultation process around their proposed “interim measures, which cover much of the Pillar 2 and Pillar 3 requirements – System of Governance, ORSA, Reporting, and the Internal Model Pre-application process - and they seem to be largely uncontroversial.
In recent industry meetings, the UK’s PRA has indicated that they expect to comply with the majority of the proposed guidelines in the interim measures, which would be effective from early 2014. But even here there is a word of warning – the PRA has suggested that up to 500 UK firms will be subject to Solvency II, but it would be uncharacteristic of them to apply equal pressure to all. The vast majority of insurers will not find themselves pressurised by the PRA to implement, with the consequent risk in many cases being late or hasty, and therefore expensive activity.
For most UK IMAP firms, 2013 will prove to have been a quieter year. But Day One approval will need their application to have been completed by mid-2015, which suggests the earlier “submission” (or draft application) no later than mid-2014. That is already looking tight for many, as an IMAP reboot is going to be needed in many cases.
Of course, most other regulators across Europe are continuing their plans for a 2016 implementation. There are differences in approach from one country to another, but that is to be expected, as there are many different journeys to a common destination.
2014 is not all that far away. Plans and budgets are getting agreed now. Resources will need to be devoted to meeting the “interim measures”, including IMAP submissions. So where is Solvency II within your firm’s plan?
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