The European Insurance and Occupational Pensions Authority (EIOPA) published the Quantitative Impact Study (QIS5) report on 14 March 2011 based on the undertakings' financial position at the end of 2009. Almost 70% of the undertakings participated in the exercise. QIS5 is the fifth and last full quantitative impact study before the Solvency II regime is implemented. The publication of the QIS5 report represents a key milestone in the finalisation of the Solvency II project. The Solvency II Directive to be implemented by 1 January 2013 establishes supervisory rules for insurance and reinsurance companies in the EU.
The Solvency II framework aims to protect policy holders and the stability of the financial system by ensuring that insurance and reinsurance undertakings are financially sound and that they can withstand adverse events. In addition to quantitative requirements, such as capital requirements (Pillar 1), insurance and reinsurance companies will be required to meet qualitative requirements relating to governance and risk-management (Pillar 2), as well as to regularly disclose information to supervisors and to the public (Pillar 3).
The Solvency II framework will consist of the rules contained in the level 1 Solvency II Directive (2009/138/EC) – as implemented by the Member States – as well as level 2 Implementing Measures and supervisory measures, the so-called level 3 implementing Technical Standards and non-binding guidelines. The new rules will be applicable from 1 January 2013 onwards.
The Solvency II Directive must be accompanied by a number of detailed, technical rules laid down in implementing measures, to be adopted by the Commission later this year.
The QIS5 is the latest in a series of studies initiated by the Commission in order to ensure an accurate formulation of the technical rules in the implementing measures.
The study results are positive and suggest that the vast majority of European insurers will be in a position to meet the new capital requirements under Solvency II.
The European Commission welcomes the results of the study which show that:
· The requirements for technical provisions, own funds and the design and calibration of the Solvency Capital Requirement standard formula require fine tuning. The Commission is to further analyse whether changes are needed to address certain concerns relating to market volatility. When finalising the implementing measures, the Commission will work closely with the Member States, EIOPA and the industry to make these refinements, based on the information collected in QIS5.
· The system is too complex particularly for SMEs. In light of this, the Commission will work on a number of measures to reduce the complexity of the calculation of the quantitative requirements and also to introduce additional simplifications to the standard calculations.
· In certain specific cases targeted transitional measures may be needed in order to ensure that there is a smooth transition to the new regime.
According to Internal Market and Services Commissioner Michel Barnier : " Final refinements will now be made to take into account the lessons learnt from the exercise and to reduce the complexity of the system."
The Commission will continue its technical work on the implementing measures, taking into account the results of QIS 5 during the course of the second quarter of 2011 and intends to publish its proposal for the Solvency II level 2 implementing measures by the end of the year.
