With less than eleven months to go until Solvency II goes live, EIOPA continues to rattle out a large number of items to assist firms and provide clarity. The first half of February 2015 has seen final reports on Level 3 guidelines, calculation aids and statements of additional workstreams.
The key items are:
- final report on Level 3 guidelines on Systems of Governance
- final report on Level 3 guidelines on ORSA
- historical levels of the Symmetrical Adjustment for the equity capital charge up to 31 January 2015. (this will be updated monthly from March 2015)
- announcement of the setting up of a new workstream to consider infrastructure investments
The final reports on systems of governance and ORSA complete the formal specification of requirements in these areas and allow firms to finalise these ahead of implementation on 1 January 2016. EIOPA did recognise, however, that further guidelines may be required in respect of the Prudent Person Principle that governs investment activities but the implication is that these will be post-S2 implementation when EIOPA has more experience of the application of the principle.
The stated purpose of the infrastructure workstream is to 'achieve a sound and prudent treatment of insurer's investment in infrastructure projects, which ultimately will benefit policyholders and the whole European economy'.
Clearly, this is a politically driven goal to ensure insurers are able to finance infrastructure projects across Europe so expect lower capital charges on a tightly defined set of assets to be the outcome.
Finally, if you are struggling to interpret some of the nuances within the Solvency II directives and guidance, EIOPA has issued the first set of guidelines in the various EU languages. I suspect maximum harmonization may not be achieved!