Barnier attacked over 'implied' backing of Solvency II
EUROPE - Industry heavyweights have criticised yesterday's speech by European Union commissioner Michel Barnier, noting he refused to withdraw support for Solvency II regulations despite insisting no decision had, to date, been reached.
In his address at the open hearing on the review of the IORP directive, Barnier, who is responsible for internal markets and services, argued that he had never "said or implied" that pension funds would be subject to the same rules as set out in Solvency II.
However, many attendees criticised the commissioner's comments, questioning why the European Commission was standing by its proposal to implement solvency measures in the IORP directive if it had no intention of employing a 'copy and paste' approach and transferring existing insurance regulations.
Mark Dowsey and Dave Roberts, both senior consultants at Towers Watson's UK operations, expressed concerns about Barnier's vision with regards to Solvency II.
"While the commissioner insisted that he was not planning to copy and paste the Solvency II framework, his speech nonetheless implied that the Commission is still intending to do something that goes along the same lines," Dowsey said.
"In addition, when given the opportunity to say that this is not going to result in a capital injection being required, the Commission failed to make any comment in that sense."
Roberts added: "Michel Barnier confirmed that it would be difficult to implement a Solvency II-type regime in the revised IORP directive, but [said it] would still be feasible and therefore insinuated that the Commission would not walk away from this approach."
The National Association of Pension Funds was also highly critical of Barnier's speech, insisting a Solvency II-type regime could cause "severe damage" to the pension industry.
The organisation's chairman Mark Hyde Harrison said: "This is the wrong directive at the wrong time. It would not only severely damage pension provision, but also the economic growth and jobs of European member states at a time when all resources are needed to tackle the financial crisis."
Hyde Harrison went on to say that the Commission had completely failed to make the case for a new IORP directive, and had not undertaken any impact assessment that might give the pension industry confidence that the new rules could meet their objectives.
Speaking during yesterday's open hearing Patrick Burke, chairman of the European Federation for Retirement Provision, insisted that Solvency II-like rules would "kill" the opportunities for employers to provide pensions to their workers.
"Employers set up pension plans for their workers on a voluntary basis, so they may stop offering them if the framework becomes too costly," he said.
"The best way forward is to protect the strengths of the existing system and further develop them, and to keep the long-term perspective alive, rather than adopt the more short-term oriented Solvency II approach."
The European Association of Paritarian Institutions (AEIP) welcomed Barnier's recognition of the sensitivity and prudence required in dealing with the subject matter.
AEIP director Francesco Briganti told IPE that he was unhappy, however, that Barnier had not taken the opportunity to rule out the application of Solvency II and regretted the lack of distinction between insurers and pension funds when it came to implementing a regulatory framework.
He continued: "We regret the comments made by Barnier when he affirmed that 'in so far as insurance products and pension schemes are comparable, the regulatory framework should be similar' and that 'the directive needs to be revised in order to maintain a level playing field for regulatory competition'."
The AEIP was also critical the fact the commissioner did not recognise the role social partners play in managing IORPs across Europe.