On behalf of the Economic and Monetary Affairs Committee, the Chair calls for the Commission to come up with amended rules in line with the ECON priorities
On behalf of the ECON Committee, the Chair made an announcement on the amendments to the Solvency II Delegated Regulation (EU) 2015/35 (“Solvency II DA”), related to the review of the Solvency Capital Requirement (SCR) standard formula (“SCR review”).
“Whilst the act was due to be adopted in December 2018, it is currently still being prepared by the European Commission; this delay did not allow us to discuss it today. We are confident that this delay means the Commission is duly analysing and taking into account our concerns, and we expect to see them addressed in the forthcoming delegated act. I will now briefly go through them.
Firstly, as mentioned in our letters, we would like to reiterate our support for a reduction of the current risk margin in order to boost the financing of the real economy and to encourage the insurers to invest in long-term projects.
Secondly, even though we acknowledge that some of our suggestions for a new equity class for long-term investments have been taken on board in the draft delegated act, we are concerned that the current design of the criteria of this new equity class, such as the 12-year duration and the ring-fencing requirements, could prevent the long-term equity class from working in practice.
Thirdly, we reiterate our position on the importance of finding a short-term solution to address the shortcomings of the current functioning of the Volatility Adjustment. We have invited the Commission to explore solutions on the basis of the current Article 77d(4) of the Solvency II Directive, according to which, co-legislators agreed that the national component should be triggered “whenever” the specific criteria are met. The component should be calculated at the end of the period if the conditions are met at any time during the reporting period itself, based on a daily calculation. In this respect, we do believe that this proposal is completely in line with the Directive and consistent with the empowerment to the Commission for the delegated act, upon which the co-legislators agreed in level 1.
Finally, in light of the delay in adopting the delegated act, a very critical point is the start of application of the new provisions. We are concerned that the current application date may create non-negligible difficulties for the reporting process due to the very short period of time that will elapse between the expected date of entry into force of the new delegated act and the first application for reporting obligations. The Commission should minimise any detrimental consequences for the companies when complying with the new provisions laid down by this act, taking into account that risk budgets and targets have been already identified in the insurance sector. We invite the Commission to carefully assess the unintended consequences in this regard and provide clarity to the competent authorities and market operators on reporting on the new provisions, in particular with respect to the templates to be used for this purpose.
For all the above-mentioned points, we consider it is not appropriate to wait and we strongly suggest they are taken up in the 2018 SCR Review. Indeed, pending the changes that will be introduced by the Commission in the draft Delegated act, we regret that, to-date, the Commission has considered that most of the suggestions made by the ECON Committee will only be explored, as stated in the draft amending Delegated Act, “in particular in its preparation for the review of the Solvency II Directive in 2020”.
In order to ensure a smooth process, we hope that the Commission will be willing to assess how Parliament’s priorities should be best addressed in this delegated act and we use this occasion to remind them of Parliament’s scrutiny prerogatives as a co-legislator, as set out in Article 290 TFEU. We will make the best use of all parliamentary prerogatives in order to ensure that our concerns will be taken on board in this important act”.