01 February 2019
The European Commission was due to adopt its delegated act amending Solvency II in December 2018, but last week the Commission informed stakeholders the delay was now expected to extend into February, sources told Insurance Asset Risk.
From conversation with stakeholders, Insurance Asset Risk understands the Commission will make an announcement around 12 February.
One risk of a lengthy delay at this stage is that the Commission runs out of time before the European elections, scheduled in May.
Under an EU procedural agreement, in an election year, delegated acts need to be presented to parliament by 15 March. Since the Solvency II reform is a delegated act (level 2 legislation), it will not be subject to formal trilogue discussions, and should be entirely possible to adopt within the current mandate.
For that to happen, the Commission needs the European Parliament and the Council of the European Union to at least not issue an opinion on the proposed reforms, or at best approve them.
However a letter by the European Parliament’s Economic and Monetary Affairs Committee (Econ) to the Commission last week suggested parliament wasn’t on board.
Indeed the letter warned MEPs would “make the best use of all parliamentary prerogatives” if the Commission did not act to amend risk margin, redesign the new long-term equity asset class, make a minor amendment to the volatility adjustment (VA), and review the application date of all the changes so they do not come in the middle of reporting season.
With the 15 March deadline looming and the Commission keen to finalise the reforms before a new political landscape emerges from the elections and subsequent appointment of a new president to the EU Commission, the question is: how much is it ready to compromise?
It is understood that of the four areas highlighted by Econ, amendment to the VA would be the easiest compromised for the EU Commission as it is considered as not too technical amendment. The Commission had stated any changes to the VA should be part of the 2020 review of the Solvency II long-term guarantee package. But insurers have argued the is well within the spirit of the original legislation
However the Commission might choose not to compromise with the parliament and the council and settle for a lengthy delay.
This according to Gareth Haslip, global head of insurance strategy and analytics at JP Morgan Asset Management, will bear little consequences for insurance asset managers.
He told Insurance Asset Risk that while these proposed changes were important and would be welcomed, they remain peripherical changes. Therefore, he said it wouldn’t be a big issue if they were delayed until the next EU parliament and commission pick it up.