The Omnibus II directive, which amends certain provisions of Solvency II, has been published by the European Commission on 13th November 2013 and, following a plenary vote, has been adopted by the European Parliament on 11 March 2014. The Council will also formally adopt the Directive before it is published in the Official Journal, and it will enter into force the day after publication. It thus appears that Solvency II remains on course for transposition by 31 March 2015, and implementation on 1 January 2016.
Omnibus II has assigned EIOPA responsibility for producing regulatory technical standards on the conditions under which outsourcing, in particular to service providers located in third countries, may be performed.
We are currently awaiting publication of EIOPA’s implementing technical standards (ITS) and guidelines. These are expected to be published in stages from April onwards. Outsourcing is covered under Pillar 2. According to the time-table below, we can expect the public consultation for ITS for Pillar 2 between June and September 2014 and the public consultation for Guidelines relevant to Pillar 2 between December 2014 and March 2015
EIOPA is going to prepare:
| two sets of ITS: | |
| Set 1: | “Approval processes”; |
| Set 2: | “Pillar 1 (quantitative basis), Pillar 2 (qualitative requirements), Pillar 3 (enhanced reporting and disclosure) and supervisory transparency”. |
| two sets of Guidelines: | |
| Set 1: | “Guidelines relevant for approval processes, including Pillar 1 (quantitative basis) and internal models”; |
| Set2: | “Guidelines relevant for Pillar 2 (qualitative requirements) and Pillar 3 (enhanced reporting and disclosure)”. |
Their timeline for the above is as follows:
| April – June 2014 | Public consultation on the Set 1 of the ITS |
| June – September 2014 | Public consultation on the Set 1 of the Guidelines |
| 31 October 2014 | Submission to the EC of the Set 1 of the ITS |
| December 2014 – March 2015 | Public consultation on the Set 2 of the ITS |
| December 2014 – March 2015 | Public consultation on the Set 2 of the Guidelines |
| February 2015 | Publication of the Set 1 of the Guidelines in all the official EU languages |
| 30 June 2015 | Submission to the EC of the Set 2 of the ITS |
| July 2015 | Publication of the Set 2 of the Guidelines in all the official EU languages |
| 1 January 2016 | Application of the Solvency II regime |
Timetables are taken from: https://eiopa.europa.eu/en/activities/insurance/solvency-ii/index.html
You can find the EIOPA guidelines here: https://eiopa.europa.eu/en/consultations/consultation-papers/2013-closed-consultations/march-2013/guidelines-on-preparing-for-solvency-ii/index.html
There are four:
- System of governance (CP-13/008). (This one looks at outsourcing in detail)
- Forward looking assessment of the undertaking’s own risk (based on the ORSA principles) (CP-13/009). (This one identifies risks arising from intragroup transactions and risk concentration in relation to intragroup outsourcing as a specific group risk)
- Submission of information to national competent authorities (CP-13/010).
- Pre-application for internal models (CP-13/011).
Here is the press release that went along with those guidelines: https://eiopa.europa.eu/fileadmin/tx_dam/files/pressreleases/2013-09-27_final_Solvency_II_Guidelines.pdf
EIOPA explained that it is up to national supervisors to decide how best to incorporate the guidelines into their national regulatory or supervisory framework.
On 17th March, the PRA published a consultation paper on a draft supervisory statement for all general insurers within the scope of the Solvency II Directive. The statement sets out the PRA’s expectations of firms in relation to the calculation of technical provisions and the use of internal models.
