Solvency II is a fundamental review of the capital adequacy and risk management regimes for the European insurance industry. It aims to establish a revised set of EU-wide capital requirements and risk management standards that will replace the current Solvency I requirements.
Implementation of the European Commission's Solvency II Directive is subject to the Lamfalussy Process. This is an approach to the development of financial service industry regulations used by the European Union. Originally developed in March 2001, it is named after the chair of the EU advisory committee that created it, Alexandre Lamfalussy.
It is composed of four "levels", each focusing on a specific stage of the implementation of legislation:
At the first level, the European Parliament and Council of the European Union adopt a piece of legislation, establishing the core values of a law and building guidelines on its implementation. The Solvency II Directive was adopted by the European Parliament on 25 November 2009 and published in the Official Journal of the European Union on 17 December 2009. The Government of Gibraltar will ensure that Gibraltar's legislative framework is amended to comply with directive requirements.
The law then progresses to the second level, where sector-specific committees and regulators advise on technical details, then bring it to a vote in front of member-state representatives. In the case of Insurance the sector specific regulatory body is the European Insurance and Occupational Pensions Authority (EIOPA) which replaced the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) on 1 January 2011. Implementing Measures have been drafted, and we anticipate that these will soon be subject to a public consultation. When the Implementing Measures are finalised they will be reflected in EU Regulations which will be binding on all European national competent authorities and insurers. In addition, EIOPA has published a timescale for consulting on and submitting proposals to the European Commission on Implementing Technical Standards, which will also be reflected in EU Regulations which will be binding on all European national competent authorities and insurers. More information can be found in the "EIOPA Timetable" section below;
At the third level, national regulators work on coordinating new regulations with other nations. EIOPA is a Level 3 committee, and issues supervisory standards, recommendations and guidelines to enhance convergent and effective application of the regulations and to facilitate cooperation between national supervisors in the form of Level 3 Guidance. In addition to taking over the responsibilities of CEIOPS it also has further powers to ensure the consistent application of Community rules. The "EIOPA Timetable" also sets outs details of the Guidelines on which EIOPA intends to consult and eventually issue.
The fourth level involves compliance and enforcement of the new rules and laws.
More information can be found on the following European Commission and EIOPA websites:
The transposition of the Solvency II Directive into Gibraltar legislation, the Financial Services (Insurance Companies)(Solvency II Directive) Act 2015 is available here.