public consultation on the Solvency II equivalence of Bermuda, Japan and Switzerland is the last chance for market participants to comment on EIOPA’s advice on the ‘first wave’ of third country assessment. All three countries were found to meet the equivalence criteria “with certain caveats”. In some cases these caveats state – “not equivalent”.
Seeking Solvency II equivalence
The equivalence assessment aims to ensure countries and their supervisory regimes “provide a similar level of policyholder/beneficiary protection as the one provided under the Solvency II Directive.” Equivalence may be sought in three areas as defined by specific articles in the Framework Directive:- Reinsurnance (Article 172) for obtaining reinsurnace outside EEA;
- Group Solvency Calculation (Article 227) for an EEA parent company with a subsidiary in a third country; and
- Group Supervision (Article 260) for a parent company in a third country with a subsidiary in the EEA.
Switzerland
![Switzerland](https://solvencyiiwire.com/wp-content/uploads/2011/08/Switzerland.jpg)
Bermuda
![Bermuda](https://solvencyiiwire.com/wp-content/uploads/2011/08/Bermuda.jpg)
Japan
![Japan - Mount fuji 1](https://solvencyiiwire.com/wp-content/uploads/2011/08/Japan-Mount-fuji-1.jpg)
Being “not equivalent”
The consultation is an opportunity for market participants and interested parties to comment on the equivalence assessment. No doubt the caveats will require further work by the relevant regulatory authorities. For example, it is not clear if being found to be “not equivalent” on a single principle would mean the entire equivalence for that article would be refused. Equivalence must also adhere to the proportionality principle of the Solvency II Directive. The introduction to the three consultation reports note EIOPA’s May 2008 advice on proportionality, which states that “The individual risk profile should be the primary guide in assessing the need to apply the proportionality principle.” And, as with much else surrounding Solvency II, the fact that the Directive text is not yet finalised compounds the challenges. A spokesperson for EIOPA told Solvency II Wire, “This is a technical assessment made on a principle by principle basis. It would be inappropriate to draw a direct comparison between the countries. EIOPA was only asked to provide technical recommendations and the ultimate decision on equivalence will rest with the European Commission.” The public consultation closes on 23 September. After that, EIOPA will pass its final advice of the equivalence assessment to the European Commission by the end of October and, it said, it will aim to publish the comments received around that time. The final decision on equivalence (due in the summer of 2012) will be made by the European Commission, although it is not bound by EIOPA’s recommendation. Thus any unanswered technical questions on equivalence may land up having a political answer.![Sushi 1](https://solvencyiiwire.com/wp-content/uploads/2011/08/Sushi-1.jpg)
![suf and turf](https://solvencyiiwire.com/wp-content/uploads/2011/08/suf-and-turf.jpg)
![Swiss cheese 1](https://solvencyiiwire.com/wp-content/uploads/2011/08/Swiss-cheese-1.jpg)