European Parliament adopts Solvency II Framework Directive

After several months of intensive negotiations between the Parliament, the Council and the Commission, the European Parliament adopted the text of the Solvency II Framework Directive in a plenary vote on Wednesday, 22 April 2009. The draft text of the Directive, as approved by the Parliament, will now return to the Council and is likely to be formally adopted during the Economic and Financial Affairs Council on 5 May 2009. To view a copy of the press release, please click here.

The move has been welcomed by the European Commission and paves the way for the more detailed rules and regulations at Levels Two and Three.

As reported in our earlier Law-Now, the text approved by Parliament last Wednesday abandoned the concept of "group support" which was included in previous drafts. Click here if you would like to read the Law-Now on this topic.

FSA Solvency II dates for your diary

The FSA published an update note (click here) on 3 April 2009, which sets out its timetable for communicating with firms on the implementation of Solvency II. Following the European Parliament's vote, firms can now expect a 'communications package' from the FSA inviting firms to advise the FSA of whether they intend to apply for internal model approval and advise them of any other action required. Firms that are in the process of planning/developing an internal model for Solvency II should note that the deadline to indicate their intention to apply is June 2009 (as initially set out in FSA's Discussion Paper last year (DP08/4)) and the dry-run process to test the models will commence in quarter 3 of 2010.

If you would like to read our April update on the progress of the Solvency II programme including information on FSA deadlines for Internal Model Approval, please click here.

Regulatory reform and Solvency II

The reform proposals taking shape in the banking sector are broadening in scope, with an ever increasing potential for significant impacts on the insurance sector. Reform is emerging at three levels – at international level (G20 and the expansion and re-launch of the Financial Stability Forum as the Financial Stability Board), at European level, and domestically with the Turner and Walker reviews and the government's white paper due shortly.

For example, Lord Myners has announced that the Walker review is being extended to include insurance companies; this review will look at a range of governance issues including directors' duties and the role of the key board committees, board pay and risk management, the role and competence of non-executive directors and whether they should have an enhanced role and resources in independent review of the executive. Many of the changes to the structure of the EU regime will impact insurers. The IAIS (International Association of Insurance Supervisors) is leading much of the international work in the sector. Whilst banks face tougher financial rules under changes to the Basel regime; the financial regulation of insurers and reinsurers will be reformed in UK and the rest of Europe under the Solvency II project the new European regime for the financial regulation of insurers and reinsurers.

If you are interested in the implications of regulatory reform in the insurance sector including Solvency II, or in our training session for general counsel, please contact Paul Edmondson.

If you are interested in attending our seminar on 2 June on the above reforms, please contact one of the authors.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 29/04/2009.