The new regime whose financial requirements are based on an economic total balance sheet approach, addresses the valuation of liabilities, including technical provisions and their margins; the quality, liquidity and valuation of assets; the matching of assets and liabilities; suitable forms of capital; and capital adequacy requirements.The new regime will drive a revolution in insurance and reinsurance companies’ solvency regulation. Indeed, starting from the three mutually-interactive pillar structure of Basel II – financial requirements, supervisory assessment and supervisory reporting and public disclosure – Solvency II is expected to emphasise the importance of realistic balance sheet valuation as the foundation for the development of a risk-based capital regulatory framework together with a realistic liability valuation.
The process is ongoing and therefore many issues are yet to be fine-tuned and worked-out in the implementing measures.
Having already contributed to the debate since July 2003 through its first Task Force on “the future of insurance regulation and supervision in the EU: New developments, new challenges”, a follow-up CEPS Task Force is set-up to examine:
-the fine-tuning of the directive and the design of the implementing measures in light of the results of quantitative impact studies and the application of the proportionality principle; and
-the future of group versus solo supervision and in particular the group support;
-and the international developments (IAIS and IASB) with a particular focus on the debate on mutual recognition
This CEPS Task Force will meet three times in 2008. The first meeting will examine group supervision issues in light of new specifications of the quantitative impact study 4 and the reports published by the CRO forum and CEA.
Amongst the invited speakers are: Dominique Thienpont (European Commission), Patrick Brady (Chairman of the CEIOPS WG on Insurance groups supervision committee) and Yann Le Pallec (Standard and Poor’s). The second meeting will focus on the proportionality principle and the third meeting will look at international developments and mutual recognition and will discuss the first draft report of the Task Force.The final report is expected to be published in autumn 2008.
Jos Streppel, CFO and Member of Executive Board, Aegon
Rym Ayadi, Head of Research, Financial Institutions and Prudential Policy Unit, CEPS