MEPs and member states last night struck a broad deal agreeing new rules for the insurance industry, which are now likely to come into force in 2016.
The rules, collectively known as Omnibus II, were proposed by the European Commission in 2011. They updated a reform of the insurance industry that had been adopted two years earlier, Solvency II, which notably set new standards for capital requirements.
According to the legency approved in 2009, Solvency II was meant to come into force in 2012, but it has been delayed on several occasions since while MEPs and member states negotiated the detailed Omnibus II legislation. So part of the significance of the agreement on Omnibus II is that it clears the way for Solvency II to take effect. The new regime for the insurance industry is now expected to come into force in January 2016.
Michel Barnier, the European commissioner for internal market and services, said: “This agreement is a very important step towards the introduction of a modern and risk-based solvency regime for the insurance industry in Europe as of 1 January 2016, making it both safer and more competitive.”
Sergio Balbinot, president of Insurance Europe, the association that represents the European Union’s insurance sector, welcomed the agreement.
The main point of disagreement between MEPs and member states was how to ensure that insurance products with long-term guarantees, such as life insurances or certain health insurances, are backed by sufficiently reliable assets – in particular at times of high financial volatility.
Other points of disagreement were how to regulate non-EU insurers and the requirements to be imposed on member states for reporting to the European committee that regulates the insurance and pensions industry, the European Insurance and Occupational Pensions Agency.
EIOPA was created out of the committee of national regulators, in the wake of the credit-crunch and financial crisis of 2008, which prompted a far-reaching haul of financial market regulation.
Insurance Europe has in the past warned that EU politicians had misunderstood the long-term nature of the insurance business and its low exposure to market volatility.
Omnibus II aimed to incorporate additional safeguards in the insurance rules after the EU’s sovereign debt crisis raised new issues about financial stability.
Omnibus II also contains transitional measures to ensure that insurance companies can switch smoothly from the existing regulatory regime – Solvency I – to the new.
Following last night’s deal, the full European Parliament will have to endorse the compromise text. That vote is expected in February.
Before that, at next week’s plenary session, MEPs will vote on a proposal from Michel Barnier, the European commissioner for internal market and services, that the Solvency II and Omnibus II rules should come into force in January 2016.
Burhard Balz, the centre-right MEP who drafted the Parliament’s response to that Commission proposal, today indicated that MEPs would approve the 2016 deadline.
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