Following last night’s political agreement among the trilogue parties on Solvency II’s Omnibus 2 negotiations, Peter Ott, European Head of Solvency II at KPMG, commented: “European policymakers have finally managed to agree on an Omnibus 2 package, allowing the European Parliament vote in February to proceed. It is very clear that all parties have moved from their original negotiating positions, and the final package is likely to be welcomed by insurers as a significant improvement to previous proposals and a workable solution.”
Janine Hawes, insurance director at KPMG, added: “The inclusion of review clauses will enable the effectiveness of the measures to be tested with the benefit of experience. This deal draws to an end the elongated political process, allowing Solvency II to progress onto finalising the delegated acts that support the directive.”
In relation to equivalence, Janine Hawes continued: “A deal has been done to recognise that where a regulatory system follows a risk-based approach which can be seen as providing broadly equivalent levels of policyholder protection to Solvency II, that regime may be regarded as temporarily equivalent for an initial period of 10 years, which can be extended. This offers a pragmatic solution for the USA in particular, where the state-based regime offered particular challenges regarding equivalence assessment. However, its application is not restricted to the USA, and it can be used more widely as global standards evolve which will help harmonise regulatory approaches worldwide. The development of a global insurance capital standard will help in this regard.
“There is now no doubt Solvency II is going ahead and insurers should use the next two years to get themselves ready for day one compliance. While this agreement marks a significant step in the Solvency II journey, the timeframe remains tight. Delegated acts and technical standards still need to be completed and there are fears that level 2 progress may be delayed as a result of the European elections. It is therefore important that all parties proceed with the development and agreement of these final stages in a timely manner.”
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.