LONDON, April 26 (Reuters) – The European Union is to put back by six months the deadline for member countries to enshrine strict new capital requirements for insurers into their law, drawing criticism from the industry over the reduced time available to adapt to the final version of the rules.
The deadline needs to move to June 2013 because the final draft of the so-called Solvency II regime is unlikely to be ready by the end of October, as planned, due to delays in the EU legislative process, the European Commission said on Thursday.
“Against this background, the Commission will present shortly a proposal postponing the transposition of Solvency II to 30 June 2013,” it said in a statement.
The proposal will also confirm that insurers must comply with the new regime by January 2014, the final implementation deadline the industry has been working towards since last year, the Commission said.
The move will leave insurers with just six months to study and adapt to the locally applicable version of the rules, when many had been counting on a full year.
It could also create bottlenecks for insurers seeking regulatory approval for their “internal models” – computer models developed by in-house experts to calculate how much capital they need to hold under Solvency II.
“Shortening the time between implementation in national law and going live with Solvency II from 12 months to six is unacceptable,” Germany's GDV insurer lobby said.
“Insurers need sufficient time to adapt to the new requirements.”
Hugh Savill, Director of Prudential Regulation at the Association of British Insurers, said the deadline extension had left the industry with “very little room for manoeuvre.”
Some in the industry, particularly smaller players who have struggled to get ready for the new regime, may now push for a postponement of the implementation deadline as well.
“Many will grasp at any branch they can find as a means of getting this deferred, and will no doubt say how can you expect us to implement something if it's only been adopted in law six months previously?” said Paul Clarke, insurance partner at accountants PricewaterhouseCoopers.
“The authorities do not want this change to in any way be interpreted as some kind of shift in the implementation date.”
Others in the industry, typically bigger multinational groups who have spent large sums preparing for the new regime, have previously opposed further delays to the Solvency II timetable.
“The insurance industry is keen to avoid delays to Solvency II and every effort should be made to keep to implementation in 2014,” said Olav Jones, deputy director general of European insurers' lobby Insurance Europe.
“That said, it is essential that insurers and other bodies have time to put reporting processes in place and to have internal models approved.”
Solvency II, which aims to make insurers hold capital in strict proportion to the risks they cover, has been ten years in the making and has already had its original 2012 start date put back once.
The rules are widely expected to lead to higher capital requirements for much of the industry, and many insurers have complained about the cost of getting ready.
Solvency II's passage through the EU legislative process has been delayed by disagreements over how much capital insurers must hold against their long-term obligations to policyholders, with early drafts condemned by the industry as too onerous.
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