Solvency II Wire has seen a copy of a letter sent to Commissioner Barnier on 21 June 2013 with the industry’s demands. The letter is jointly signed by the heads of the PEIF, Insurance Europe, the CFO Forum and the CRO Forum. While generally supportive of EIOPA’s recognition of the need to make adjustments to Solvency II, the letter suggests these should be extended beyond the recommendations of the report.
On the Volatility Balancer, the letter states, “The Volatility Balancer methodology contains inconsistencies, the design is flawed and calibrations so onerous as to make it ineffective.” It proposes increasing the 20% spread of a reference portfolio, arguing that the figure is “arbitrary” and “does not offer protection against pro-cyclical behaviours at times of crisis.”
The authors express dissatisfaction with the suggested extension of the Extrapolation convergence period beyond ten years, “The extrapolation should … start at year 20 (for the Euro) and have a convergence period of 10 years.” The proposed seven year cap on Transitionals is also rejected by the authors, and there is a call to extend the Classical Matching Adjustment to include a wider range of products.
The letter concludes stating that the industry is ready to engage in dialogue with regulators. However it notes, “We believe a number of substantial changes in the proposals and their calibrations … are still required to enable the measures to be effective.”
Solvency II Wire has also seen correspondence suggesting there has been some disagreement among Insurance Europe members, especially about the tone of the letter. However a significant majority agreed with the final text.
It is understood that industry representatives will be meeting with the Commission this week, ahead of its meeting with EIOPA.