Brussels, 20/11/2008 (Agence Europe) - Future negotiations on the draft Solvability II directive updating EU insurance company rules will be tough. EU representatives to the EU (the COREPER committee) decided on general guidelines on Wednesday 19 November 2008 on the new legislation that rules out group supervision measures and the group support system. The general guidelines were decided upon by qualified majority despite the opposition of five mss (Denmark, Finland, Ireland, the United Kingdom and the Netherlands). The bla, represented by its rapporteur, British Labour MEP Peter Skinner, and the scam, represented by the Internal Market Commissioner Charlie McCreevy, immediately reacted on Thursday 20 November, opposing this preliminary agreement, with the backing of the insurance industry. The French Presidency of the Council of the EU now has a mandate on which to negotiate with the EP. The general guidelines still need to be confirmed by the ECOFIN Council on Tuesday 2 December 2008, however.
One of the key aspects of the draft Solvability II directive is support in the form of capital that companies would have to provide to their subsidiaries. The Commission suggested that the calculation of demands in capital could be made at the level of the group, allowing the group to reduce compulsory own funds. Under current rules calculation must be done at subsidiary level. If a subsidiary is in difficulty, the parent company would make a written promise to go to its assistance, granting it own funds. These provisions meet with strong opposition from some 15 member states whose insurance sector is essentially made up of subsidiaries from large foreign companies, as shown by the discussions of the Ecofin Council in October (see EUROPE 9756). The French EU Presidency notes in a document that “at this point, an agreement in the Council on the Solvency II draft directive can only be reached if the issue of group supervision is dissociated from the remaining parts of the text”. It considers that “more work is needed to build sufficient consensus to establish a more efficient, integrated and sustainable system of supervision for groups”. It went on to note that the Commission has already launched reflection on this through the Larosière group.
“I am disappointed that the Coreper discussed deleting group support. This is an integral part of the supervision process within Solvency II. Parliament is now in agreement with the Commission on opposing this deletion and also agrees that the current proposal on equities is not acceptable”, Mr Skinner told EUROPE in writing. Voted early October in the parliamentary committee on economic and monetary affairs, the Skinner draft report contains detailed proposals on group supervision and the group support regime (see EUROPE 9757). “The Commission clearly cannot accept this amendment proposal from member states. The Commissioner has said that group support was an integral part of the Solvency II proposal. It is therefore essential to move away from just national surveillance. With this change from Coreper, we could not go along the lines of European supervision”, Mr McCreevy's spokesman said (see EUROPE 9783). The European Insurance Federation (CEA) said it was “disappointed” that the French Presidency's proposal compromise had done away with any reference to the group support regime. “The European insurance industry has always maintained and continues to believe that the group support regime is a fundamental element of Solvency II's economic risk-based regulatory regime”, Tommy Persson states in a press release.
Minimum capital required. The Council and the EP are at least in agreement on one point, a point which is not the least important. Both take the view that calculation of the minimum capital required (MCR) must be proportional to the solvency capital required (SCR). Following the opinion of the European committee, CEIOPS, the Council states that the MCR must be between 25% and 50% of SCR, with the EP recommending a lower range (25-45%). (M.B./transl.jl)