One small step for the European Parliament, one giant leap for Solvency II
On March 11, 2014, the European Parliament adopted the Omnibus II Directive. The long-awaited plenary vote adopting Omnibus II was the last element needed to amend the Solvency II framework directive, granting additional powers to the European Insurance and Occupational Pensions Authority (EIOPA) and introducing a package of measures to support long-term products. Firms can now continue their preparations on the basis that the new Solvency regime will come into force on January 1, 2016.
The final Omnibus II text agreed by the trilogue in November last year introduces substantive changes to the Solvency II Directive. In particular, Omnibus II clarifies the role of EIOPA, specifies areas in which EIOPA can propose harmonised technical standards and ensures supervisory convergence and cooperation between national supervisors. Omnibus II also includes a package of measures to facilitate insurance products with long-term guarantees and transitional measures both for EU insurers and third countries moving towards equivalence. Insurers will continue to be able to match long-term liabilities with investments in long-term assets such as infrastructure projects. Omnibus II also contains measures to mitigate the effects of artificial volatility, such as a matching adjustment for annuity business, a volatility adjustment, extrapolation of the risk-free interest rate, transitional measures and the extension of the recovery period.
The final Omnibus II text has not been published yet. The Council of the EU will need to formally adopt the Directive before it is published in the Official Journal. The next stage of Solvency II implementation is now underway. The Commission is preparing a Delegated Act containing a large number of detailed implementing rules which is expected this summer. Meanwhile, EIOPA is developing implementing technical standards aimed to ensure implementation on January 1, 2016 goes smoothly.