11 November 2009
Published in: Regulation - supervision
CEIOPS’ final advice responds to some industry concerns
The final advice on the vast majority of Solvency II level 2 implementing measures was published yesterday by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS).
The advice, approved by CEIOPS' members on 30 October, is based on the first and second wave of consultation papers and includes the following topics: the valuation of assets and liabilities, the treatment of special purpose vehicles (SPVs), the approval process of internal models, the choice of the risk-free rate for discounting technical provisions, the classification and eligibility of own funds, capital add-ons, reporting and disclosure, remuneration and group solvency.
CEIOPS has also included in the advice "the lessons learnt from the crisis which should be reflected in the future level 2 implementing measures." This covers the treatment of risks (credit, market, concentration and operational), the need for stress testing and the robustness of internal models.
Seamus Creedon, managing the European actuarial profession's contribution to Solvency II, said: "Our views of the final advice from CEIOPS frankly are very mixed. We welcome some indications that CEIOPS has taken on board industry and professional feedback in relation to issues such as quality of capital and operational risk. We also welcome some expanded consideration of the importance of governance, including the importance of actuarial expertise in managing risk and uncertainty."
But Creedon added: "We are very concerned that the effect of much of the CEIOPS advice on pillar 1 would be to destabilize life assurance business particularly. This is because the advice applies short-term volatilities to what are often very long-term contracts. If ways cannot be found to reflect the underlying true economic position, the flow of long-term investment by the industry will be impaired with adverse consequences for the economy. I am sure the European Commission will want to consider this carefully."
CEIOPS received 3,600 comments on the first wave of consultation papers and over 20,000 comments on the controversial second wave.