While Solvency II likely will be delayed beyond its slated start date of Jan. 1, 2014, companies should continue to prepare for certain elements of the European risk-based capital rules when they do come into force, experts say.

Debate over the treatment of long-term guarantee business likely will delay a vote on Omnibus II, which would amend elements of Solvency II including its start date. That vote, which already has been the subject of delays, was scheduled for October.

And European Parliament elections will take place in May 2014, meaning that a new group of politicians may be debating Solvency II, leading to potential further delay, observers say.

But, while elements of the rules need to be finalized, companies still can prepare for areas of the rules that likely will not change, such as the Pillar II requirements on risk management and governance, industry sources say.

And there is scope for Solvency II to be implemented in stages, they said.

In a speech to insurers last week, Andrew Bailey, CEO of the Prudential Regulation Authority, the U.K. insurance regulator, said he hopes there might be agreement on the rules by the end of the year. But he described the official implementation date of Jan. 1, 2014, as “unrealistic.”

He said the PRA was working toward a Dec. 31, 2015, implementation deadline and noted that “during that period, we are allowing firms to put to use the significant investment in Solvency II internal models to meet the current regulatory requirements” under the PRA's individual capital adequacy standards, which are known as ICAS Plus.

Mr. Bailey added that the PRA likely would continue to make early adjustments to its regulatory regime to incorporate elements of Solvency II such as the Own Risk and Solvency Assessment, or ORSA, into the ICAS Plus rules. “This will mean that U.K. insurers are better prepared for the introduction of Solvency II,” he told delegates at the Association of British Insurers' biennial conference

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Experts say 2016 is a realistic start date for Solvency II. But regulators may move to introduce some parts of the rules on a transitional basis, they say.

The big concern about the timing of Solvency II is the fact that there are European Parliament elections next year, and that “could mean there's almost bound to be a further delay to the process,” said Rob Jones, a managing director at Standard & Poor's Corp. in London.

He said the industry's response on the issue of long-term guarantee assessments means that “the baton has passed back to the politicians.”

He said he would expect the insurance industry to keep the pressure on regulators to remove areas of volatility under the proposed rules and maintain the momentum toward introduction of Solvency II.

The European Insurance and Occupational Pensions Authority has asked that national regulators report on their progress toward implementing Solvency II in 2015, said Nick Dexter, actuarial life executive adviser at KPMG L.L.P. in London.

“It is clear that EIOPA wants to keep the momentum up,” he said, adding that this means some national regulators will wish to report on progress earlier than that in order to get a sense of how prepared companies are for the upcoming rules.

Companies should “walk the talk” on Solvency II, Mr. Dexter said.

Many have argued that Solvency II should be good for business, and the fact that its full implementation may be delayed should not stop them from incorporating elements such as the Pillar II risk management requirements into their business models, he said.

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Companies are aware that Solvency II will happen even if it is delayed and that they should be ready, said Marc Beckers, head of analytics for Aon Benfield in the Europe, Middle East and Africa region. “Whether it is 2016, 2017 — it will come,” he said.

The need to understand risks as envisioned by the Pillar II demands is the most important element of the proposed rules and one for which companies must be prepared, he noted.

Clara Hughes, a senior director at Fitch Ratings Ltd. in London, said Fitch believes there is unlikely to be full implementation of Solvency II before 2016.

“We are pretty sure there will be some partial implementation,” she said. For example, the ORSA requirement is likely to be implemented by national regulators such as the United Kingdom's PRA, she said.