European Committee Second Quarter Update 2011
Summary
Overview
It feels as if we are in a much worse place than we were the last time the ABI’s EU Quarterly Update hit the email lists and websites. For once I can’t blame the sporting results. Maybe it’s the darkening clouds in the sovereign bond market, or perhaps the accompanying downpour in the equity market.
Actually, a quick reality check suggests that, in the EU regulatory world, very little has changed at all. Indeed, I am forced to admit that some things have even got better. Our technical colleagues continue to negotiate forcefully on the Level 2 text for Solvency 2 – with commendable progress being made on the matching premium, on the calibration of general insurance, and on the liquidity premium. We are also close to achieving a satisfactory outcome for pension-related investment in the EMIR regulation on central clearing of derivatives, an outcome that I would have bet against.
Elsewhere, the prevailing note is delay. MiFID is delayed till October, PRIPS and the IMD review till early 2012, a proposal on crisis settlement till December. The Commission are clearly having trouble digesting their own legislative programme, and I confidently expect further delays.
The implications of Test Achats remain foggy. Commissioner Reding has now summoned a CEO level meeting in September. The Commission hope to produce interpretative guidance at the year end, and we can hope that this offers a degree of certainty on some of the outstanding questions. The main question is the treatment of contracts agreed before the end 2012 deadline but continuing in force after it. We have commissioned a legal view from Slaughters & May that confirms the prevailing view that these contracts can remain gender-biased. That is also the approach that the British Government intend to take. Complete certainty will not be possible on all the issues arising from the Test Achats judgment, and insurers would be well advised to take their own comprehensive legal advice.