Regulatory bodies and insurance firms are keen to assess the impact of implementation, and to audit the data gathered. This will ensure that Solvency II fulfils its mission to ‘greatly improve and modernise the current EU framework for the prudential regulation of insurance’,1 and will not become an increasing reporting burden for insurance firms.
The Treasury issued a call to review the full impact of Solvency II in 2018. This was due to fears that the regulations would impact competition in the insurance industry, as well as concerns that the implementation across Europe would not be uniform. Assessments are being made during Solvency II’s first live year across the Insurance industry. This will help assess whether the consequences of EIOPA’s legislation have been fully explored in the UK.
EIOPA published a paper last year promoting the need for high-quality public disclosure in the form of a Solvency II external audit. Research from Solvency II Wire shows Europe split almost 50:50 in their external audit requirements. Only Ireland, Italy, the UK and Gibraltar remain undecided, and are consulting on the external audit decision.2 EIOPA are recommending an audit of SFCR, but some nations believe the audit to be yet another cost burden of Solvency II, and have stated that they will not require an external review.
In the UK, all eyes are on the Brexit. Despite the debate surrounding the impact of a Leave vote across the regulatory landscape, it is unlikely to have any impact on Solvency II. ABI’s Huw Evans stated that ‘If the UK were to leave the EU, it would still be required to follow the equivalent of Solvency II to be able to trade with it’.3
Whilst some firms have already reached the hurdle of Day 1 reporting, the impact of Solvency II continues to be debated and assessed six months after its initial implementation. It is unlikely that we will see a full overview of Solvency II’s impact until all firms in Europe have completed their first year of filing.
1‘Call for evidence on EU regulatory framework for financial services’ – HM Treasury 02/06/2016
2‘Europe split over Solvency II external audit’ – Solvency II wire 02/06/2016
3‘EU and Pensions: The Facts’ – Association of British Insurers 02/06/2016