EIOPA consulting on guidelines for preparation of Solvency II

The European Insurance and Occupational Pensions Authority (EIOPA) has launched a public consultation on guidelines related to the preparation for Solvency II that proposes an application date, but also seeks to inject some flexibility into the process.

The guidelines apply from Jan. 1, 2014, although they allow for some flexibility through provisions for “phasing in” and the use of thresholds, notes a statement issued yesterday by EIOPA, part of the European System of Financial Supervision consisting of three European Supervisory Authorities, the National Supervisory Authorities and the European Systemic Risk Board.

The guidelines cover the areas the authority considers fundamental to ensure effective preparation for Solvency II: system of governance, including risk management; forward-looking assessment of the undertaking’s own risk; submission of information to National Competent Authorities (NCAs); and pre-application for internal models.

“It is up to NCAs to determine how to comply with EIOPA’s guidelines by incorporating them into their regulatory or supervisory framework in an appropriate manner,” the authority reports.

NCAs are expected to ensure insurance companies and groups take active steps towards implementing the relevant aspects of the regulatory framework addressed in these guidelines, the EIOPA statement says.

However, EIOPA makes it clear the guidelines “should be applied in a proportionate way and, in particular, with regard to the burden on small and medium size undertakings.”

The guidelines “will play a fundamental role in supporting the good function of the internal market in the insurance sector and will ensure a higher quality of information,” EIOPA chairman Gabriel Bernardino says in the statement.

The public consultation ends June 19, with EIOPA expecting to publish the final guidelines this fall. The timeframe should allow NCAs to put in place certain important aspects of the preparation for Solvency II starting on Jan.1, 2014.