Solvency ii News February 2012

Solvency ii Association
1200 G Street NW Suite 800 Washington, DC 20005-6705 USA
Tel: 202-449-9750 www.solvency-ii-association.com
Solvency II News, February 2012
Dear member,
There is an interestingdevelopment.
For years, theUnited Kingdom wasleadingthe SolvencyII
developmentsin many aspects.After thevetoof David Cameron some
weeksago, UK looksisolatedand unableto influencetheEU rules,
puttingitsinsuranceindustry at a competitivedisadvantage.
Britain reallywantstorelax the capital treatment under SolvencyII of
long-term life insurancecontractssuch asannuitiesthat are mostly soldin
theUK than in anyother EU country. This hasbecome reallydifficult
now, asthere is a “tit for tat” (equivalent retaliation) approach in the EU.
From the game theory, weknowthe rules:Unlessprovoked, always
cooperate. If provoked, retaliate.
Politicians…
EIOPA - theEuropean Insuranceand Occupational PensionsAuthority
hasa hard timetodecidewhat todo withthemore than 3,000comments
that make clearthepension industry’s responseto the challengethat a
SolvencyII type regime should be applied to fundeddefinedbenefit
pensions.
Pensionsprofessionalstry hard to avoid a regime designedfor insurance
companies.
There is another problem… there wouldnot be enough actuaries in
Europe to deal withtheworkload.
www.solvency-ii-association.com

Thesame time, Fitch Ratingsbelievesthat SolvencyII may significantly
increasethecapital and complianceburden of the European captive
market.
Captivesin theEU need better risk management and governance
functions,better qualityand / or additional etc.
Thesame time, weare expectingthe report (ordered by theDodd-Frank
Act) from theUS Federal InsuranceOffice(FIO) within theU.S.
Department of Treasury, that will explain how the United Stateswill
modernize and improve insuranceregulation.
TheUS insuranceand reinsuranceindustry isconcerned that the
regulatorysystems in other countrieswill put firmsin theStatesat a
disadvantage.
Dear member,
Todaywemust alsoremember the changesafter the Omnibus2 draft
Directive. It is time tounderstand better some important parts.
TheOmnibusII draft Directiveamendsimportant partsof the Solvency
II Directive:
1. TheOmnibusII draft Directivechangesthe implementationdate
from the31st
of October 2012tothe1st
of January2013.
2. TheOmnibusII draft Directivereplacesthe “implementing
measures”with the“delegated acts” and the “implementing
technicalstandards”. Some monthsbefore, wewereexpecting
Level 2 implementingmeasuresthat wouldtake the form of either
a Directiveor a Regulation.After theOmnibusII draft Directive
weare expectingdelegated actsand implementingtechnical
standards.
3. TheOmnibusII draft Directivereplacesall referencestoCEIOPS
with referencestoEIOPA
4. TheOmnibusII draft Directiveintroducesnew powersfor EIOPA

5. TheOmnibusII draft DirectivegivestotheEuropean
Commissionthe (discretionary) powerstodefer the
implementationof significant featuresof SolvencyII.
Experienceof the financial crisishasexposed important failuresin
financial supervision. President Barrosothereforerequested a group of
high level experts, chaired by Mr Jacquesde Larosière, to make
proposalstostrengthenEuropean supervisory arrangements.
TheGroup presented itsreport on 25February 2009.
Building on its recommendations, the Commission set out proposals for
a new European financial supervisory architecture in its Communication
tothe Spring European Council of March2009.
TheCommission presented itsideasin more detail in its
Communication of May2009whichproposed:
-Establishinga European System of Financial Supervisors
(ESFS), consistingof a network of national financial supervisorsworking
in tandem withnew European SupervisoryAuthorities(ESAs), created by
transformingthe existingEuropean supervisorycommitteesintoa
European BankingAuthority (EBA), a European Insuranceand
Occupational PensionsAuthority (EIOPA), and a European Securities
and MarketsAuthority (ESMA), therebycombiningthe advantagesof an
overarchingEuropean frameworkfor financial supervision withthe
expertiseof localmicro-prudential supervisorybodiesthat are closest to
theinstitutionsoperating in their jurisdictions;and
-Establishinga European Systemic RiskBoard (ESRB), tomonitor and
assesspotential threats tofinancial stability that arise from macro-
economicdevelopmentsand from developmentswithin the financial
system asa whole.

Tothisend, the ESRB wouldprovidean earlywarningof system-wide
risksthat may be buildingup and, wherenecessary, issue
recommendationsfor action to deal withtheserisks.
TheCommunication alsoconcluded that in order for the ESFS to work
effectively, changestothe financial serviceslegislationwouldbe
necessary, in particular toprovidean appropriatescope tothemore
general powersprovided for in the individual regulationsestablishing the
authorities,ensuring a more harmonisedset of financial rules through the
possibilityto develop draft technical standardsand facilitatethesharing,
wherenecessary, of micro-prudential information.
Consultation of the interested parties
Twoopen consultationswereconducted in thedevelopment of these
proposals.
Firstly, followingthereport of thehigh-level group chairedby Jacquesde
Larosière and thepublicationof the 4March2009Commission
Communication, theCommission organiseda first consultation from 10
Marchto10April 2009asinput to itsCommunication on Financial
Supervision in Europe publishedon 27May 2009.
Asummary of the public submissionsreceivedcan be found at:
http:/ / ec.europa.eu/ internal_market/ consultations/ docs/ 2009/ fin_sup
ervision/ summary_en.pdf
Secondly, from 27Mayto 15July 2009, the Commission organised
anotherconsultation, invitingall interestedpartiesto comment on the
more detailed reformspresentedin theCommunication onFinancial
Supervision in Europe of 27May2009.
Theresponsesreceivedwerefor the greater part supportiveof the
suggestedreforms,with commentson detailed aspectsof theproposed
ESRB and ESFS.

Asummary of the public submissionsreceivedcan be found at:
http:/ / ec.europa.eu/ internal_market/ consultations/ docs/ 2009/ fin_sup
ervision_may/replies_summary_en.pdf
Additionally, a Commission ServicesStaff WorkingPaper waspublished
on 23September 2009to preview the possibleareaswhereamendments
tosectoral legislationmay be necessary. The workingpaper can befound
at:
http:/ / ec.europa.eu/ internal_market/ finances/ docs/ committees/ super
vision/ 20090923/ sec2009_1233_en.pdf
IMPACT ASSESSMENT
TheMayCommissionCommunicationon Financial Supervision in
Europe wasaccompaniedby an impact assessment analysing themain
policy optionsfor establishingthe ESFS and ESRB.
Asecond impact assessment accompaniedthe legislativeproposals,
examiningthe optionsin more detail.
Thesecond impact assessment analysed theoptionsfor the appropriate
powersfor the authoritiesto worktowardsachievinga singleset of
harmonised rulesand concludedthat thiscapacitywouldbe rightly
limitedtothoseareasto be defined in forthcoming sectoral legislation,
and identifiedsuch potential areas.
Additionally, in developingthedraft technicalstandardsthemselves,the
authoritiesshould undertake appropriateanalysisof potential related
costsand benefits and consult stakeholdersbeforesubmitting them to
theCommission.
Thesecond impact assessment report isavailable at:

http:/ / ec.europa.eu/ internal_market/ finances/ committees/ index_en.h
tm#package
LEGAL ELEMENTSOF THE PROPOSAL
Given that changesneed to be introduced intoexistingDirectivesto
ensure thedevelopment of a singlerulebook, an amending Directiveis
themost appropriate instrument. ThisamendingDirectiveshould have
thesame legal basisasthe Directivesit amends.
Transposition
MemberStatesshall adopt and publishthe laws,regulationsand
administrativeprovisionsby 31December 2012at the latest.
Theyshall forthwithcommunicate totheCommissionthetext of those
provisionsand a correlationtablebetweenthoseprovisionsand this
Directive.
Theyshall applythoseprovisionsfrom 1January 2013.
When Member Statesadopt thoseprovisions,theyshall contain a
referenceto thisDirectiveor shall be accompaniedby such a reference
on theoccasionof their official publication. Member Statesshall
determinehow such reference isto bemade.
MemberStatesshall communicate totheCommissionthetext of the
main provisionsof national law whichtheyadopt in thefield covered by
thisDirective.

Consultation Paper on the Proposal for Quantitative Reporting
Templatesfor Financial Stability Purposes EIOPA_CP_11/ 011,
21December 2011
EIOPA welcomescommentson the Consultation Paper on thisproposal
for quantitativereportingtemplatesfor financial stabilitypurposes.
Theconsultation includes:
- thisConsultationPaper;
- accompanyingSpreadsheets,and LOGs;
- a Templatefor Comments.
Publication of responses
All contributionsreceived will be publishedfollowingthecloseof the
consultation, unlessyou request otherwisein therespectivefield in the
templatefor comments.
Astandard confidentialitystatement in an email messagewill not be
treatedasa request for non disclosure.
Aconfidential responsemay be requested from usin accordancewith
EIOPA’srules on public accesstodocuments.We may consult you if we
receivesuch a request. Any decision wemake not todisclosetheresponse
is reviewableby EIOPA’s Board ofAppeal and theEuropean
Ombudsman.
General Reporting Requirements for Financial
Stability Analysis Purposes
Applicability of financial stabilityadd+on templates
Thefollowingentitiesshall submit the information contained in the
quantitativereportingtemplatesfor financial stability:
1) Undertakingswith more than EUR 6bn in balancesheet total;

2) Groupswith assetswithmore than EUR 6 bn in balancesheet total.
In order tokeep thesample composition more stableover time,
admissiontoand deletion from the sampleshall be phased in and
phased out. This would mean that groups/undertakingswhosetotal
balancesheet is closeto thethreshold (EUR 6 bn ) shall not switchin
and out every other year.
Explanatory text
Applicability of templates
Undertakingsand groupswithtotal balancesheet in excessof EUR 6bn
shall submit theinformationcontained in the quantitativereporting
templatefor financial stability.
Solo insurance undertakings and groups beyond the EUR 6 bn balance
sheet total threshold shall submit the same information, on the highest
possiblelevel of consolidation, for financial stability purposes.
Any soloundertakingbeing member of a group whichreportsfor
financial stabilityanalysispurposesin aconsolidated manner (therefore
includingthis very soloundertaking), shall not report (i.e. no double
reporting from both a group and a soloundertaking).
For phasing in and out due the EUR 6 bn threshold the 6 months notice
is a minimum. As the principle shall be transparent, candidates will have
more timetoprepare.
Overview on templates, applicability and frequency
QFS= applicableQuarterlyfinancial stability information:
AFS= applicableAnnual financial stabilityinformation
R meansthat red and yellow marked part of the templateis applicable
S= applicableannuallyfor soloundertakings
G = applicableannuallyfor groups
QS = applicablequarterlyfor soloundertakings

QG = applicablequarterlyfor groups
DS= publicly disclosedtemplates(annually), for soloundertakings
DG = publiclydisclosedtemplates(annually), for groups
RFF = applicableannuallyto each material ring_fenced fund, for solo
undertakings
X meansthat thetemplateis applicable
E meansthat the templateis applicablewith possibleexemptions

Tofind more:
https://eiopa.europa.eu/ consultations/ consultation-papers/ index.html

Solvency II SpeakersBureau
TheSolvencyII Association hasestablishedthe SolvencyII Speakers
Bureau for firmsand organizationsthat want to accesstheexpertiseof
Certified Solvencyii Professionals(CSiiPs) and Certified Solvencyii
EquivalenceProfessionals(CSiiEPs).
TheSolvencyII Association will be theliaison betweenour certified
professionalsand theseorganizations,at no cost. We stronglybelieve
that this can be a great opportunity for both, our certified professionals
andtheorganizers.
Tolearnmore:
www.solvency-ii-association.com/ Solvency_II_Speakers_Bureau.html
Course Title
Certified Solvency ii Professional (CSiiP):
Preparing for the Solvency ii Directive of the EU (3 days)
Objectives:
This coursehasbeen designed toprovidewiththe knowledgeand skills
needed to understand and support compliancewiththeSolvencyii
Directiveof theEuropean Union.
TargetAudience:
This course isintendedfor decision makers, managers, professionals
and consultantsthat:
A.Work in Insuranceor Reinsurancefirmsof EEAcountries.
B.Work in Groups- Financial Conglomerates(FC), Financial Holding
Companies(FHC), MixedFinancial HoldingCompanies
(MFHC), InsuranceHolding Companies(IH C) - providing insurance
and/ orreinsuranceservicesin theEEA, whoseparent islocatedin a
country oftheEEA.

C.Want tounderstand thechallengesand the opportunitiesafter the
Solvencyii Directive.
This course ishighlyrecommendedfor supervisorsof EEA countries
that want to understand how countriesseeSolvencyII asa Competitive
Advantage.
This course is also recommended for all decision makers, managers,
professionals and consultants of insurance and/ or reinsurance firms
involvedin risk and compliancemanagement.
About the Course
INTRODUCTION
TheEuropean Union’sLegislativeProcess
Directivesand Regulations
TheFinancial ServicesAction Plan (FSAP) of theEU
ExtraterritorialApplication of European Law
ExtraterritorialApplication of the SolvencyII Directive
Solvencyii and theLamfalussyProcess
Level 1: FrameworkPrinciples
Level 2: Detailed Technical MeasuresLevel3: Strengthening
CooperationAmong Regulators
Level 4: Enforcement
Weaknessesof SolvencyI
From SolvencyI toSolvencyII
Solvencyii Players
Solvencyii Objectives
THE SOLVENCY II DIRECTIVE
AUnified LegislativeBasisfor Prudential Regulation of Insurers
andReinsurers
Risk-BasedCapitalAllocation
Scope of theApplication

Important Definitions
Value-at-Riskin SolvencyII
Authorisation
CorporateGovernance
GovernanceFunctions
RiskManagement
CorporateGovernanceand Risk Management - Level 2
Fit and proper requirementsfor personswhoeffectively run the
undertakingor haveother key functions
Internal Controls
InternalAudit
Actuarial Function
Outsourcing
Board of Directors:Role and Solvencyii Responsibilities
12Principles– System of Governance (Level 2)
PILLAR 2
SupervisoryReview Process(SRP)
Focuson Risk Management and Operational Risk
Own Risk and SolvencyAssessment (ORSA)
ORSA- TheInternal Assessment Process
ORSA- TheSupervisoryTool
ORSA- Not a Third SolvencyCapital Requirement
Capital add-on
PILLAR 3
DisclosureRequirements
TheSolvencyand Financial Condition Report (SFC)
PILLAR I
ValuationOf AssetsAnd LiabilitiesTechnicalProvisions
TheSolvencyCapital Requirement (SCR)

TheValue-at-RiskMeasureCalibratedtoa 99.5% Confidence
Level over a 1-year Time Horizon
TheStandardApproach
TheInternal Models
TheCollectionofAdditional HistoricalData
External Data
The Minimum Capital Requirement (MCR)
Non-Compliancewiththe Minimum Capital Requirement
Non-CompliancewiththeSolvencyCapital Requirement
Own Funds
Investment Rules
INTERNAL MODEL APPROVAL
CEIOPSLevel 2 - Testsand Standardsfor Internal Model
Approval
CEIOPSLevel 2 - The procedure tobe followedfor the approval of
an internal model
Internal ModelsGovernance
Group internal models
Statistical qualitystandards
Calibrationand validationstandards
Documentation standards
SOLVENCY II, GROUP SUPERVISION AND TH IRD COUNTRIES
SolvencyI: SoloPlusApproach
Group Supervisionunder SolvencyII
Rightsand dutiesof the group supervisor
Group Solvency - Methodsof calculation
Method1(Default method):Accounting consolidation-based
method
Method2 (Alternative method): Deduction and aggregation
method

Parent UndertakingsOutsidethe Community - Verification of
Equivalence
Parent UndertakingsOutsidethe Community - Absence of
Equivalence
Thehead of thegroup isin theEEA and the third country regime
is not equivalent
Thehead of thegroup isin theEEA and the third country regime
is equivalent
Thehead of thegroup isoutsidethe EEAand the third country is
not equivalent
Thehead of thegroup isoutsidethe EEAand the third country
regimeisequivalent
Small and Medium-SizedInsurers:TheProportionalityPrinciple
Captivesand SolvencyII
EQUIVALENCE WITH SOLVENCY II AROUND THE WORLD
Solvencyii and Countriesoutsidethe European EconomicArea
TheInternationalAssociation of InsuranceSupervisors(IAIS)
TheSwissSolvencyTest (SST) and Solvencyii:
Solvencyii and theOffshoreFinancial Centers(OFCs)
Solvencyii and theUSA
Solvencyii and theUS NationalAssociation of Insurance
Commissioners(NAIC) - The Federal InsuranceOffice created
under the Dodd-Frank Wall Street Reform and Consumer
ProtectionAct in theUSA, and the ORSAin theUSA
FROM THE REINSURANCE DIRECTIVE TO THE SOLVENCY II
DIRECTIVE
Directive2005/ 68/ EC of 16November 2005on Reinsurance- The
ReinsuranceDirective(RID)
CLOSING
TheImpact of Solvencyii OutsidetheEEA
ProvidingInsuranceServicestotheEuropean Client

Competing withBanks
Learningfrom theBasel ii Framework
RegulatoryArbitrage:AMajorRisk for Countriesthat see
Complianceasan Obligation, not anOpportunity
Basel II, Basel III, SolvencyII and RegulatoryArbitrage
Challengesand Opportunities:What is next
RegulatoryShopping after SolvencyII
Tolearnmore about theonlineexam you may visit:www.solvency-
ii-
association.com/ CSiiP_CSiiEP_Frequently_Asked_Questions.pdf
www.solvency-ii-association.com/ CSiiP_CSiiEP_Certification_Steps.pdf
Tolearnmore about thecourse:
www.solvency-ii-association.com/ Certified_Solvency_ii_Training.htm

Solvency ii News February 2012

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Mehr von Compliance LLC

Mehr von Compliance LLC (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Solvency ii News February 2012