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BRUSSELS—The European Parliament's decision to delay its vote on Omnibus II, the directive that will introduce Solvency II in stages, means insurers' uncertainty over some details of the risk-based capital rules will be prolonged, experts say.
However, the delay should not mean that insurers will slow their preparations for Solvency II, they say.
A European Parliament vote on Omnibus II had been slated for late last year. But in December, the Parliament said the vote would not take place until April.
That delay could hinder progress in adopting Solvency II, which is slated for partial implementation beginning Jan. 1, 2013, according to KPMG L.L.P.
“This is another blow to the insurance industry, significantly shrinking the time frame between final rules being issued and the industry having to comply,” said Janine Hawes, a director in KPMG's Solvency II team in London. “These latest delays mean the industry will be forced to spend another four months in the dark.”
Once again, she said, “insurers are facing looming deadlines without sufficient time to get their heads around the final rules. Solvency II is a huge undertaking for insurers, and the fact that deadlines have kept slipping further complicates matters.”
“The lack of guidance is a huge problem,” she said. “The industry has been crying out for clarity on critical technical issues. These latest delays make it seem as though no one is listening,” she said.
But while the delay in voting on Omnibus II also will delay clarification of certain technical aspects of Solvency II, the implementation date of Solvency II likely will not be affected, so insurers must move forward in their preparation for the new regime, said Jim Bichard, an insurance partner at PricewaterhouseCoopers L.L.P. in London.
In the interim, companies may need to look to their national regulators for extra guidance, he said.
There have been delays in acting on various aspects of Solvency II previously. Because of that, the European Commission and the European insurance regulator, the European Insurance and Occupational Pensions Authority, have factored such delays into their timetable to implement Solvency II, said Gareth Haslip, London-based head of risk and capital strategy for the Europe, the Middle East and Africa for Aon Benfield.
European regulators are “giving the fairly uniform message that they are expecting companies to get on with Solvency II,” Mr. Haslip said.
For example, the U.K. Financial Services Authority has indicated that companies that intend to use their own internal models for Solvency II can begin to do so starting Jan. 1, 2013.
“The momentum for Solvency II has reached a critical mass and a lot of people are up to speed for 2013 and 2014,” Mr. Haslip said.
While the European Parliament did not outline the reasons for delaying its vote, it likely indicates that there is still much political negotiation to be completed before the vote can take place, said PwC's Mr. Bichard.
The parliamentary process in Europe is a complicated one and the politicians involved likely have “quite a lot of other big issues on their minds,” Aon Benfield's Mr. Haslip said.
For more information, go to Business Insurance's Solution Arc: Solvency II compliance and business challenges for insurers.