03/11/2009 16:19

Mark Batten, partner, PricewaterhouseCoopers LLP, said:

"The second wave of consultation papers issued over the summer by CEIOPS, created a significant amount of debate within the European insurance industry. This focused primarily around the level of prescription proposed in relation to quantitative aspects of the Solvency II text and the impact of the proposals on regulatory capital requirements. Indeed, the industry responded with over 20,000 comments and lobbying directed through industry bodies.

"The anticipated response from CEIOPS to this consultation is expected later this month and the industry will clearly want to understand how CEIOPS have reflected the feedback in their final advice to the European Commission.

"The third wave of consultation papers, issued yesterday (November 2nd) continue to reflect the caution shown in the previous consultation papers, raising some questions as to whether industry concerns have been taken on board by CEIOPS. The consultation papers cover several important areas for the European insurance industry, particularly the rules relating to partial internal models, calibration of the European Standard Formula, the assessment of group capital, and simplifications including those relating to captive insurance companies. An example of this cautious approach by CEIOPS’s can be found in its own assessment of the impact of the proposed advice on correlations within in the European Standard Formula which suggest an increase in capital requirements compared with the earlier assessment carried out in 2007 (known as "QIS4") in the order of 25 percent.

"No doubt industry will continue to engage with the consultation process to help CEIOPS formulate their advice to the European Commission, which is ultimately responsible for the final detailed rules under "level 2" of the legislative process. The advice from CEIOPS forms an important part of the European Commission’s considerations, albeit they are not bound to follow it either in whole or part."

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