Colleges crucial to Solvency II equivalence drive

Colleges crucial to Solvency II equivalence drive

Supervisory colleges will provide a practical solution for home-host supervision under Solvency II equivalence, the Swiss supervisor has said.

Regulators in Asian jurisdictions, such as Japan, Taiwan, Hong Kong and Singapore, are already showing interest in using supervisory colleges to determine capital holdings for insurers based in their jurisdictions but with operations within EU jurisdictions, according to Monica Mächler, vice-chair of the board of directors at the Swiss Financial Market Supervisory Authority (Finma).

Mächler was talking at Reactions’ Insurance Risk & Capital Management Conference Europe, an event taking place in Dublin on January 10 and 11.

The European Insurance and Occupational Pensions Authority (Eiopa) will be responsible for development of colleges of supervisors for Solvency II home-host supervision of large cross-border insurers.

Eiopa’s sister body, the European Banking Authority, responsible for cross-border banking supervision in Europe, has experience with creating colleges for Basel II compliance for large banks, under Europe’s Capital Requirements Directive.

Many non-EU supervisors concerned with professional privacy rules, such as Switzerland, also face regulatory obstacles around information sharing for large cross-border groups, agreed Finma’s Mächler and AM Best’s general manager for analytics Vasilis Katsipis.

Switzerland and Bermuda are the first national insurance regulatory regimes being considered for equivalence with Solvency II in 2011, with Japan’s reinsurance supervision also under consideration.

The US will likely be granted a “transitory” deal toward equivalence with Solvency II, according to Katsipis, citing current problems for EU supervisors in dealing with the multiplicity of US state-level insurance commissioners.

There is no indication as yet whether the new Federal Insurance Office, created under last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act, will assume a strong supervisory role in the US.

Mächler said the EU should not adopt a “tick box” approach to equivalence.

Katsipis suggested that in the case of smaller jurisdictions to be considered for equivalence, the non-EU regimes may be expected to submit their domestic insurance regulations to a degree of convergence between Solvency II.

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