Many industry observers consider Solvency II to be a worthy attempt by European regulators to forge a more uniform approach to safety and soundness supervision. Its impact extends beyond Europe: It has influenced global-standard setters at the International Association of Insurance Supervisors and has even had an impact here in the U.S. at the National Association of Insurance Commissioners (NAIC).
That said, many people, particularly at the NAIC, have voiced concerns that Solvency II so far is largely a theoretical exercise rather than a tried-and-true regulatory regime. The European Commission’s willingness to develop a full regime largely on paper differs from the NAIC’s approach of “tweaking” the U.S. regime via the Solvency Modernization Initiative.
Moreover, timelines for the completion of Solvency II have been extended several times—and it’s fair to say that it still has a long way to go before it is final.
Considering the economic uncertainty that continues to plague the Eurozone, insurers and regulators should be prepared for corresponding effects on Solvency II’s development and implementation. A regulator’s first and primary duty is to the local market, and as an appointed official, you have a boss (governors, taxpayers, etc). You are sometimes compelled to take a narrow, territorial view, which can limit any esprit de corps or cooperative arrangements among peer governments.
With this in mind, it would not be terribly surprising for more immediate priorities, such as those related to the European economy and the state of the single currency, to be of primary importance to Eurozone nations.
Henry Jupe, Jean Connolly and Mary Ellen Coggins contributed to this article.