Oliver Peterken queries whether Solvency II will be passed unchanged considering current questions over regulation and the financial turmoil
A senior industry figure has questioned whether Solvency II will pass through the hands of European policymakers ‘unscathed’ considering the current financial market turmoil.
On October 7 the European Economic and Monetary Affairs Committee agreed a text for Solvency II, which is expected to be put before a vote at the European Parliament in November. After that, the directive still has to be enacted individually in every member state.
‘It is unfortunate timing for the supporters of Solvency II that they are trying to get it through the European Parliament in the middle of probably the worst financial crisis the world has ever seen,’ said Oliver Peterken, chief risk officer for Aspen Re.
‘With the background of various concerns over regulatory failures in numerous jurisdictions, it is going to be a much more difficult political process than it would have been six months ago,’ he continued.
Peterken suggested that before the financial crisis Solvency II would have enjoyed a smoother ride. ‘I think now it will be caught up in all the questioning and the various political investigations into what’s gone wrong. And you can’t see it would necessarily get through that process completely unscathed. I think the political environment has shifted fundamentally as far as anything to do with regulation is concerned,’ he said.
‘(Solvency II) was conceived over the last ten years or so in a very different economic and political climate to what we are now seeing. I think the political factor has become quite a big unknown,’ he argued.
He also questioned whether individual member states would be comfortable ceding authority to a central regulator. ‘As we’ve just seen in the last few days in times of crisis all European governments revert to national interests. Whether that aspect of Solvency II gets through unchanged I’m not sure.’
Generally the Directive has seen widespread support from the insurance industry. The CEA, the European insurance and reinsurance federation, has welcomed the recent moves at a European level.
Michaela Koller, director general of the CEA said ‘we are pleased that this vote keeps the timetable for the Directive on track’.
He said the regulation ‘already provides a response to future calls for changes in regulation as a result of the current market turmoil’.
Koller said ‘delays in implementing this enhanced approach to the calculation and regulation of insurers’ solvency requirements would send the wrong message both to European consumers and to the international community, particularly during the current market turmoil’.