Regulation  

A happy ending for Solvency II?

Final talks on the latest proposals were voiced throughout the ABI’s Solvency II conference in London at the end of October, but despite being so close to completion and seemingly roadworthy it continued to divide opinion.

Following the collapse of several eurozone economies and growing doubt on the prospect of a unified European state, getting so many culturally and economically different nations to agree on a set of proposals was never going to be easy.

This was certainly one of the main talking points at the ABI’s conference, which provided delegates with a perfect opportunity to voice last-minute anxieties before the ship finally sets sail.

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Kicking off proceedings, Andy Briggs, group chief executive at Friends Life, urged the insurance industry to forget past hiccups and prepare for a potentially lucrative end to the decade. Mr Briggs said the insurance sector had a great opportunity to drive growth, and markets could triple in size providing a suitable agreement is reached on equivalence.

He said for the new directive to be a success it was fundamental that Solvency II did not alienate prosperous multinationals. He said: “The UK insurance industry will be a much poorer place if we drive the large global insurers from our shores.”

This concern was shared by Sajid Javid, financial secretary to the Treasury, who followed Mr Briggs on stage to reassure those present that the government has done its utmost to protect UK interests. Mr Javid said third-country equivalence, together with matching adjustment, was an issue where the government “really had to fight the UK’s corner” against a “hostile” reception from EU nations.

He added: “Taking action to improve the sector here at home is futile if Solvency II is designed in a way that prevents European insurers from competing overseas, and that’s why it’s been so important to achieve a sensible solution to third-country equivalence. Getting the right outcome on this issue remains a top issue for the government.”

Mr Javid, who was upbeat on the progress made and compromises met so far, said the latest proposals would encourage long-term investment and were a significant and “more exciting” development to the previous directive.

He likened Solvency II to the film Godfather II because it is a sequel that shows more promise than the original work.

This sense of positivity was not on the agenda, however, for Liberal Democrat Sharon Bowles, a member of the European Parliament. Ms Bowles said the “sticking problem” for EU policymakers remained the US, and warned that equivalence is not possible when not everyone is in agreement.

She said: “Parliament is keen that we have an arrangement that doesn’t put the European insurance industry at risk, so they want to have these temporary equivalence arrangements.

“The Commission is less keen on these and doesn’t want to have something open-ended; they want an end date in place. You can’t just say, ‘This is the standard and everyone else has to fit to it’ because not everyone wants equivalence. When Canada said it wasn’t seeking equivalence that was a wake-up call.”