The IORP directive has put the spotlight on occupational pensions supervision and regulation at the European level. At the centre of all this is the Committee of European Insurance and Occupational Pension Supervisors (CEIOPS). Although not yet two years old, CEIOPS will already be finding that there are considerable challenges, if not contradictions, inherent in its role as the EU’s pension and insurance clearing-house.
The first of these is the tension between insurance and pensions themselves. The second relates to the sheer problems in trying to create a workable regulatory template for European
The first thing to note, of course, is the remit of the committee – insurance and pensions. CEIOPS is involved in two massive issues at the moment, the so-called insurance Solvency II project and the implementation of the pension directive. To say the committee has a lot on its plate risks understatement.
The solvency project is, in the Commission’s own words, a “fundamental and wide-ranging” review of the current regime of insurance solvency. By any standards it is a project of great complexity and importance within Europe’s financial services industry. And then there is the directive, and we all know about that.
The committee - which went live in May 2004 - grew out of the Conference of European Insurance Supervisors (CEIS).
None of the top staff at CEIOPS has specific pensions industry experience. Chairman Henrik Bjerre-Nielsen of Denmark joined the CEIS when he became director general of the Danish Financial Supervisory Authority in 1996. Vice chairman Thomas Steffen joined the CEIS when he became head of insurance supervision at BaFin in 2002. Secretary general Alberto Corinti was previously at Italy’s insurance supervisory authority Isvap. So the people charged with shepherding European pensions supervision all have insurance industry backgrounds.
Although there is some overlap between the solvency project and pensions, in truth there is little real common ground between CEIOPS’ work on solvency and on the pensions directive. The markets are just too different.
It is a valid question, given all this, to ask whether pensions are getting the attention they deserve. An industry which is trying to get pan-European funded systems off the ground may be justified in feeling that its interests are not being best served.
This tension between the two aspects of the committee’s work reflects the wider schizophrenia about the source of European retirement provision. The directive, after all, is not officially called the pension fund directive.
The second aspect that presents potential contradictions to the committee is the very nature of Europe’s pensions industry. Just trying to provide a meaningful supervisory overview of European pensions may become a thankless task.
The challenge CEIOPS faces is that it has to, by definition, address its task from the top down in a way that builds consensus. The problem is that trying to do that with the European pension markets looks very much like trying to fit a square peg into a round hole.
Simply put there is no such thing yet as a European occupational pensions market as such – so trying to impose supervisory oversight may not just be premature, but it could even stifle that which it seeks to promote.
CEIOPS did not have an auspicious birth, with its introduction marred by an unseemly wrangle over its location. It eventually took Frankfurt as its base, which observers at the time took to be a political decision.
There has been criticism, not least from the European Federation for Retirement Provision (EFRP). The EFRP has said some of its proposals could undermine the transposition of the directive. And despite the committee’s stated commitment to openness and transparency, there have been rumblings in the industry on this issue as well.
CEIOPS is a so-called level-three Lamfalussy committee – this means it gives technical advice to level two, or regulatory, committees. It plays the same theoretical role as the Committee of European Securities Regulators and the Committee of European Banking Supervisors.
In practice, however, CEIOPS lags due to the simple fact that Europe’s pension markets - and the associated regulatory frameworks - are so much more diversified than the securities and banking markets.
CEIOPS is a forum for the co-operation and exchange of information between supervisors – but it is not allowed to address labour and social law or to consider individual institutions. European Central Bank president Jean-Claude Trichet has already explicitly stated that CEIOPS’ success will be measured by how it achieves supervisory convergence.
CEIOPS’ purpose, according to its articles of association, is to advise the Commission on occupational pension fund and insurance supervision – in particular the preparation of draft measures for the implementation of EU
This is to be achieved through the promotion of a “consistent implementation and enforcement of EU directives and the supervisory convergence among the member states”.
Chairman Bjerre-Nielsen says: “In the end, supervisory practices are the sum of decisions in specific cases. CEIOPS may be considered as a network of supervisors, which may co-ordinate their practices – even in specific cases, but CEIOPS has no powers to instruct members or observers.” Despite this, CEIOPS does have formal role in the EU legislative process.
Although it advises the Commission, it also reports to the European Parliament. While commission observers are entitled to attend meetings, they have no voting rights.
It is not widely known that not every member state is represented on CEIOPS – this is because not every supervisory authority is recognised as a legal entity.
According to its charter: “The committee will promote a consistent implementation of EU directives and of supervisory convergence among member states, as well as best practice in the member states, on issues of insurance and pension fund supervision.”
So CEIOPS faces challenges on several fronts. Foremost among these - from the pension industry - is to ensure that the pensions issue is in its rightful place on its agenda, and that it can then go on to create a workable framework for pensions supervision.