1,000 more pages to add to your summer reading
On 2 June 2014, EIOPA invited comments on the public consultation of Set 1 (of 2) of the Solvency II Guidelines (GL), forming part of Level 3. The GL are addressed to national supervisors and operate on a comply-or-explain basis. Their aim is to achieve convergence of Union law and supervisory practices established by EIOPA.
The GL have been developed based on Solvency II as amended by the Omnibus II Directive, and the current Commission’s Delegated Acts (i.e. Level 2). Interested parties looking to provide feedback will need to do so by 29 August 2014 giving just under 3 months to read and make their comments on the consultation papers.
The consultation includes a set of 6 consultation papers (totalling 938 pages), a template for comments, and an annex (providing supporting information). A cover note pulls the collection of papers together, which provides useful background and highlights the key features of each of the consultation papers. It also notes the nature of the GL, which in the case of internal models, governance, and ORSA are quite high-level compared to more prescriptive GL for the standard formula, and comments on proportionality and convergence.
Consultation papers
Below is a list of the consultation papers with a brief outline of topics covered in each paper.
Pillar 1 (This is the longest of the consultation papers at 375 pages)
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Technical provisions
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Own funds
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Standard formula SCR
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Group solvency
Internal models (The contents of this paper have largely been consulted on already)
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Application
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Model changes
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Tests and standards
Pillar 2 (The contents of this paper have largely been consulted on already)
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Own Risk and Solvency Assessment (ORSA)
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Governance
Supervisory Review Process (SRP)
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General principles for the SRP
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Description of the process
Equivalence (This is the shortest with only 36 pages)
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Compliance and reporting rules
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Final provision on reviews
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A comprehensive report summarising the impact of all GL.
The papers on internal models and Pillar 2 have already undergone extensive consultation for the purpose of the preparatory phase. Additional material added in these consultation papers has been highlighted yellow and EIOPA has asked readers to concentrate on these sections.
Conclusion
Despite the papers being split across different areas, EIOPA has warned that some topics cut across different papers, meaning firms may have to read several consultation papers to find all the GL that affect them.
Once comments have been received and assessed by EIOPA, it will then judge whether revisions to the GL are necessary or not. All submitted comments will be available to see on EIOPA’s website (unless respondents request otherwise).
EIOPA understands that convergence will take time to establish and it anticipates that further areas for development will appear as a result of developments in the market or regulation. EIOPA has also explained that it may use more prescriptive approaches if it feels that this will promote greater convergence.