The FINANCIAL — The Solvency II Directive, adopted by the European Parliament and the Council in 2009 and to be implemented by 1 January 2013, has set the framework for the next generation of supervisory rules for insurance and reinsurance companies in the EU.
"As the rules of the Solvency II Directive are to be complemented by so-called “level 2” implementing measures, which will be adopted by the Commission, sound and extensive empirical data for quantitative solvency requirements are needed. For this reason, the Commission has launched a fifth Quantitative Impact Study (QIS5) that will be run by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) from August to November 2010. The European Commission strongly encourages insurance and reinsurance companies across the EU to participate in this exercise," Europa reports.
Internal Market and Services Commissioner Michel Barnier said: "This additional quantitative impact study for Solvency II will allow us to get the details of the Solvency II implementing measures and the exact calibration of those measures right. The results of the study will help the Commission to take a final decision on the amount of capital that insurance and reinsurance companies will be required to hold under the new solvency regime. We need reliable, extensive and representative data from the market in order to make the right decisions. I therefore strongly encourage the insurance industry to participate in this exercise."
QIS5 is the latest in a series of studies initiated by the Commission in order to ensure the most accurate formulation of the Solvency II framework. QIS1 to QIS4 took place between 2005 and 2008. The results of these studies provided the empirical basis for the preparation by the Commission of the Solvency II Directive (2009/138/EC), as well as for the subsequent negotiations between the European Parliament and the Council.
The results from the fifth QIS will provide valuable input to help refine the calibration of the Solvency Capital Requirement standard formula, as well as the requirements for technical provisions and own funds in the level 2 implementing measures. This means that the final requirements that will be introduced may be different from the approach tested in this exercise. The results from QIS5 will be discussed in detail with the Member States, as well as with other stakeholders.
It is essential for the successful introduction of the Solvency II framework that QIS5 provides solid data that is representative of companies across insurance business lines and Member States. This can only be ensured through a high level of participation in QIS5. The Commission aims for a participation rate of at least 60% of EU insurance and reinsurance companies and 75% of EU insurance groups. It is particularly important that smaller insurance companies, as well as insurance providers specialised in specific business lines participate in the exercise.
CEIOPS has made available the QIS5 spreadsheets on its web site, and will shortly make available some additional guidance for companies who have never participated in a QIS exercise before.
On Solvency II
The aim of the so-called “Solvency II” framework is to ensure that insurance and reinsurance undertakings are financially sound and can withstand adverse events in order to protect policy holders and the stability of the financial system as a whole. In addition to quantitative requirements, such as capital requirements (Pillar 1), insurance and reinsurance companies will be required to meet qualitative requirements relating to governance and risk-management (Pillar 2), as well as to regularly disclose information to supervisors and to the public (Pillar 3).
The Solvency II framework will consist of the rules contained in the level 1 Solvency II Directive (2009/138/EC) – as implemented by the Member States – as well as level 2 Implementing Measures and supervisory measures, i.e. so-called level 3 Binding Technical Standards and non-binding guidelines. The new rules will be applicable from 1 January 2013 onwards.