Brussels, 29/11/2007 (Agence Europe) - On Tuesday 4 December, EU finance ministers will take note of progress at the Council after 11 meetings of experts working on the draft Solvability II directive introducing new solvability rules for the European insurance and reinsurance industry (see EUROPE 9465). A progress report drawn up by the Portuguese presidency discusses several amendments to the initial proposal. The amendments cover application of the principle of proportionality when implementing the future rules, particularly from the viewpoint of small and medium-sized enterprises (SMEs) and the powers of national control authorities to intervene in a system based on the economic assessment of risks run by insurers. According to the Portuguese presidency, the European Commission's proposals on control at group level came in for a number of comments from the member states, whose views differ on important issues. But the documents are far from their final version on this point.
The Portuguese presidency says that one of the key factors which will determine the success or failure of the Solvability II directive is the way it applies to small and medium-sized insurance and reinsurance enterprises. It notes that whether introduced in the framework directive or in implementation measures for European legislation, the future rules must not set up a two-approach regime and their implementation should be compatible with the inherent nature, scope and complexity of business risk concerned. On the intervention powers of national control authorities, the Portuguese presidency suggests amendments in order to better identify potential cases where surveillance authorities might impose supplementary own funds requirements on an exceptional basis; and clarifying the powers of control authorities to require companies to test out their prudential models in stressed market situations.
Codifying 13 existing directives, the draft Solvability II directive is based on three pillars - calculating capital requirements based on an economic assessment of the risks run by insurance companies; greater cooperation between national regulators responsible for controls at group level; and tighter obligations with regard to the publication of information. Just 14 insurance companies account for more than 80% of the European market, valued at €7,000 billion. (M.B.)