It has been another hectic week for Solvency II followers.
Responding to Prudentials comments and others, the European Commission said "The Commission fundamentally disagrees with statements made by some insurance companies that Solvency II leaves them with no choice but to leave the EU.
-Solvency II–which the industry campaigned for in the first place–will improve the international competitiveness of insurers, not undermine it.
-The financial crisis demonstrated only too clearly how important good risk management and sound governance are.
-This is true for all financial actors, and not just banks. And this is not time for complacency in the financial sector.
- The fact is that the existing regulatory regime for insurers is outdated. It’s not risk-based. It does not reflect the way insurers manage their business.
- What we want to achieve with Solvency 2 is simple: good risk management and greater protection for policyholders. Ultimately, it's taxpayers who will benefit too.
-And because we have a secure and sound framework, the EU will be a more attractive place for insurers to operate in.
- Suggesting the Americans are doing nothing in this area is false. Remember that the old American system gave us AIG. The US is also now regulating its insurance companies better, drawing the right lessons from the crisis.
- Our proposals have not been plucked from the sky. Solvency II has been subject to more consultation and impact studies that any initiative carried out in the framework of financial services. They all show the benefits by far outweigh the costs.
-And the fact is that the great majority of Solvency II is supported by all stakeholders.
-There are a few issues which indeed remain to be solved. But they should not be exaggerated. And we count on all parties involved, including Prudential, to work constructively in order to find suitable solutions to them. It's up to Member States and the European Parliament to conclude negotiations now. But there is no need for alarm."
The message did not go down well with the industry-Legal& General head Tim Breedon said Solvency II had descended into a mess, and Deputy Governer of the Bank of England, Paul Tucker, commented that the industry and regulator were frustrated with the costs of transitioning to Solvency II with the risk of regulators drowning in data which is difficult to absorb and may distract from the big risks.
However, with a key vote due next Wednesday, it seems that the dropping of matching premiums, which would seriously impact the life and annuities sector, may not be tabled in the European Parliament proposals after all. Full marks for industry lobbying.
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