EUROPE - The European Parliament member tasked with delivering a consensus on the Solvency II directive has called on the European Commission to start afresh in its search for a pensions solvency regulatory solution which recognises pensions provision has to be suitably funded.
The European Parliament's committee on Economic and Monetary Affairs (ECON) agreed amendments to the proposed text of Solvency II yesterday and placed an amendment in Solvency I which requires the European Commission to develop "a proper system of solvency rules for pension provisioning whilst fully reflecting the essential differences with insurance and reinsurance undertakings".
Much of Article 311 was repealed and Recital 93 was inserted to effectively maintain the status quo for European occupational pension funds covered by the Institution for Occupational Retirement Provision (IORP) directive, ensuring they are not placed under undue pressure at this stage to increase their solvency levels to match terms required of insurance companies under Solvency II.
Peter Skinner, MEP and Solvency II Rapporteur, told IPE while there are some similarities in the type of pensions delivered between countries and between what is considered to be the traditional pensions market and insurance-led plans, the two systems must be recognised as different and should be treated as so for solvency regulatory purposes.
"Where there is like-for-like [on pension provision] there must be some degree of consultation," said Skinner.
"Some schemes such as those in the Netherlands could be considered to be more insurance-backed in their design, for example, whereas company-backed pensions like those in the UK are clearly not the same vehicle so we do not want to treat them in the same way. Even if in some countries insurance is the dominant pension provision, under pay-as-you-go (PAYG) schemes, it should not be that you have to reverse the pensions industry back into Solvency II. Pension funds are different.
"I am calling for the Commission to come up with its own proposals to suit all pension provision. This should allow each industry to recognise their own, but injects the realities of the modern pensions industry. We need a clean whit sheet of paper to deal with this. The similarities between systems and schemes are grossly exaggerated over the process of solvency.
Details of Recital 93 specify: Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision contains references in its Article 17(2) to the existing legislative provisions on solvency margins. These references should be retained in order to maintain the current situation. The review of Directive 2003/41/EC, which was stipulated in Article 24 paragraph 1, should be carried out by the Commission as quickly as possible. The Commission, supported by CEIOPS, should develop a proper system of solvency rules for pension provisioning, whilst fully reflecting the essential differences with insurance and reinsurance undertakings."
But Skinner acknowledges the European Commission is still under pressure to come up a solution which will put an end to the political rows over the potential for the management of pensions liabilities, but believes a separate solution has to be sought.
"The Commission is under pressure on this issue to deliver by 2010/2011 as something should be delivered prior to Solvency II being on the statute books," said Skinner.
"We do not need to create a solvency regime for pensions. We want to have the IORPs develop their own structure, providing the correct level of supervision. We do not want to see people picked off unnecessarily and we don't want to see people calling for IORPs to follows Solvency II where they do not provide IORPs," he continued.
What officials have managed to achieve under Solvency II, however, is some consensus on how supervision might be achieved between a group supervision regime and local regulators where there are cross-border operations.
More specifically, a vote was passed which clarified group supervisors would work with local supervisors where necessary, giving local regulators a say in any discussions concerning an entity, though in situations where no joint agreement could be reached CEIOPs could be called on to facilitate any final decision.
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