The bloc of EU member states opposed to the inclusion of Solvency II-inspired provisions in the planned IORP II Directive, appear to be on the road to victory.
This common front reduces the chances of the holistic balance sheet (HBS) proposal getting through the Brussels legislative machinery. This is because the measures would fail when they are subject to member state approval.
The protest countries are Germany, Ireland, the Netherlands, and the UK. In late February Belgium joined. This was announced by its deputy prime minister and minister for pensions, Alexander De Croo, at a meeting called by the Belgian Association of Pension Institutions.
Little fanfare accompanies the group of five. Rather, it has involved diplomacy. After the Commission’s proposal is published, EU Council procedures normally involve member state government ‘Perm-Reps’ holding official working group meetings behind closed doors.
The protest goes back to the public hearing on the revision of the IORP Directive, in March 2012 when national positions were spelled out.
The new group of five’s position comes close to prevailing under the EU’s qualified majority (QM) voting rules. Using a voting calculator to simulate Council voting, it would take only a single, small, member state to join the protest-five to form a “blocking majority”, according to Bart De Wit, at the Belgian Association.
Alongside Belgium’s stance comes support from the European Parliament’s Economic and Monetary Affairs committee chair, Sharon Bowles. She recalls that some in the insurance sector, including InsuranceEurope, have called for a “same risks, same rules” principle to be adopted.
However, the British repeat the cry that “occupational pensions are so different [from insurance] that this principle cannot be applied here successfully”. Similarly, Dutch MEP, Ria Oomen-Ruijten, supports the line that increased capital adequacy rules in IORP II could jeopardise the adequacy of the present and future pensioners.
However, this centre-right parliamentarian does perceive “[legislative] opportunities in revision” to IORP. Examples would be qualitative requirements on, for example, transparency of investment strategies and costs.
From the left, Peter Skinner MEP adds: “It would be foolish to rush in with the HBS solution until it is ready.” However, he adds: “That does not mean that we cannot tighten [the legislation] up now.”
The Commission, which is sticking to its plan to publish proposals for IORP II by June, states that its basic position remains as expressed in March 2012.
Then, Nadia Calviño said that the Commission cannot move ahead without keeping Solvency II as an option, but not the only one. The deputy director general of the Commission’s Internal Market DG referred to the need to ensure that young people could retire with adequate pensions.
Recently, InsuranceEurope expressed fears that regulatory arbitrage would result “if insurance companies move to the Solvency II regulatory regime, while [occupational] pension funds remain under Solvency I”. The body representing the insurance sector notes that work is still needed.
It added that, when an appropriate design for the calculations relating to long-term guarantees “is satisfactorily resolved”, the Solvency II principles should also be appropriate for pension funds. This would be provided that the economically significant differences between pension products and occupational pension schemes were taken into consideration.
In Brussels there is some speculation that the Commission will delay from June its IORP II proposals. More likely is that the Commission’s forthcoming proposal will simply defer measures to cover the Solvency II/HBS/capital adequacy issue.
“Michel Barnier would be able to walk away at the end of his present mandate [31 October 2014], reflecting with satisfaction upon his achievements in occupational pensions,” comments Charles Cronin, member of EIOPA. EIOPA’s work on the HBS will not be made public until June.