Thursday, October 25 15:40:54
European Union officials have entertained the idea of a two-year delay in the implementation of strict new capital rules for the bloc's insurers, an internal document shows.
The Solvency II rules, proposed by the European Commission and aimed at making insurers hold capital in strict proportion to their liabilities, have already been delayed by persistent disagreements over their final shape, angering the industry and undermining their intended status as a benchmark for regulators worldwide.
The EU document, seen by Reuters, looks at the option of holding tests to gauge the impact of Solvency II after governments agree the new rules in principle, and concludes that this would push the new regime's start date out to 2016.
However, the document, which was prepared by the Commission for discussion by EU lawmakers and member states, expresses a preference for holding the tests first because this would allow the rules to take effect in 2015, just one year beyond the official 2014 deadline.
"The current system is inadequate in identifying the risks to which insurers are exposed," the paper states.
"It is therefore important that the approach agreed ... results in the most expeditious full application of Solvency II possible."
The Commission proposed putting back Solvency II to 2015 during talks with lawmakers last month, a source told Reuters at the time, but it has not publicly set out a new start date despite pressure to do so from insurers and regulators.
Negotiations are now under way over a new implementation deadline, political and industry sources said, and a decision is likely in the next few weeks.
Insurers and national regulators already say Solvency II will probably have to be postponed until 2016 because entrenched differences between member states over the impact of the rules on life insurers put even a 2015 start date in doubt.
"My personal view is that 2016 would be more realistic," Carlos Montalvo, executive director at pan-European insurance regulator EIOPA, said at a regulatory conference this week. "For 2015 to happen, everything and more would need to be perfect."
EIOPA is due to test how the new rules would affect insurers' ability to offer long-term savings and life products which guarantee a minimum rate of return, wh ich are popular in Germany, E urope's second-biggest insurance market.
The test is expected to start in mid-December and the r esults, due by May, may prompt fresh changes in the Solvency II regulations. Leading European insurers have said they would rather the rules were delayed than pushed through only to be amended later, although most want an early introduction to eliminate uncertainty over their capital requirements.
"When the time frame is pushed out, that makes it difficult to set internal milestones, and that makes it very costly just for the larger players in the market," said Munich Re board member Ludger Arnoldussen, speaking at an industry meeting on Monday. (C ) Reuters