The FSA is proposing a ‘split’ implementation whereby responsibilities for supervisors and EIOPA will apply from 1 January 2013 and responsibilities for firms will apply from 1 January 2014. The FSA will only revisit these assumptions, “if there is a significant change in the dates to beyond 2014”.
The CEA said it was “comfortable” with this decision. In response to the announcement, a spokesperson told Solvency II Wire, “Discussions are pointing to a ‘split’ implementation of Solvency II. The CEA is comfortable with this, provided that insurers get at least 18 months between the point at which reporting requirements under Level 3 are finalised and the point at which they are to be used by undertakings.”
The CEA stressed the need for an appropriate period between achieving legal certainty on the content of delegated acts and full implementation of Solvency II, enabling companies to adapt their systems and procedures.
The announcement is also likely to have an impact on the implementation timetables of other European regulators, according to Gareth Haslip, Head of Risk and Capital Strategy for EMEA, Aon Benfield. “The FSA has been one of the leading regulators in terms of timetable and readiness for Solvency II. So the announcement signals to the rest of Europe that a 2014 implementation is more acceptable. This will make other regulators more comfortable with a 2014 deadline.”
Given the varied level of readiness of member states the announcement will be welcomed by many firms. There is a view in Europe that a split implementation makes a lot of sense given the original Omnibus text suggested transition measures of up to ten years and the fact that for some member states the move to a risk based regulation is a significant change for existing regulatory framework.
Frances Rossell, Certified Financial Risk Manager, working for the Spanish insurer Insare said, “In Spain, where the market is more fragmented than in other countries, with abundance of small and medium-sized insurers, preparation of Solvency II is very uneven. The split in implementation dates could delay preparations even further, pending clarification of issues such as the principle of proportionality for SMEs, or the extent of partial internal models.”
Some organisations have historically taken a position of “wait and see” on Solvency II and successive delays in implementation seem to have justified their decisions. According to Mr Rossell, “Entities that are already developing a plan to adapt to new regulations may benefit from split dates, as they have some more time to finish adjusting their models of calculation and management processes. Those that have not yet begun work will be late for Solvency II deadline despite the delay.”
An ‘opt-in option’
The CEA said a ‘split’ implementation should not disadvantage those firms which have been on track to implement Solvency II. “If undertakings are ready to comply with new requirements before the full application of Solvency II, there should be an ‘opt-in option’, allowing them to use their internal models, for example,” the CEA said.
Mr Haslip sees a number of positives for the delay, even for firms that are planning to be ready for a 2013 implementation deadline. “One of the positives of the announcement is that it gives more firms, especially smaller and medium size companies, an opportunity to apply for an internal model. For those firms that will be ready for 2013, it is an opportunity to leverage your Solvency II investment to improve business decisions and run your business in a more capital efficient way.”
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