BERNARDINO SAYS S2 TECHNICAL PROVISIONS MUST BE AS PRUDENT AS POSSIBLE

Gabriel Bernardino, chairman of the European Insurance & Occupational Pensions Authority (EIOPA), has said that insurers' technical provisions need to be "as prudent as they can be". Speaking to the European Parliament yesterday, following EIOPA's release of its final Guideline text for Solvency II, Mr Bernardino said that he was "a little bit concerned with some of the values I have seen floating around in terms of calibrations". The vote on Omnibus II, the text that needs to be passed by the European Parliament before Solvency II can be introduced, has been delayed several times because some countries – Germany in particular – want the capital requirements relaxed for life assurers that have issued rate guarantees on past policies. Mr Bernardino voiced the frustration of the industry, which in total has spent billions of euros preparing for the new regime, when he said that "agreement on the final date is urgently needed ... to avoid market fragmentation. We cannot continue with the current regulatory uncertainty". Mr Bernardino revealed that insurers in the EU would face a "comprehensive" stress test in 2014, after EIOPA had identified a prolonged period of low interest rates as a threat to the sector's stability. However, EIOPA will not publish individual results of the stress test. He also stated that there was no need to centralize the supervision of leading insurers, since the European Central Bank would be doing so for leading financial sector companies in the euro zone from next year. Meanwhile, commenting on the EIOPA release, Charles Garnsworthy, UK Solvency II leader at consultancy PricewaterhouseCoopers, said that the release represented "a significant step in the journey towards Solvency II implementation". He noted that "insurers now have a clearer idea of what EIOPA expects of them but, in the UK, will be looking for further clarity from the Prudential Regulation Authority about how they intend to adopt these guidelines". Mr Garnsworthy warned that, because the Guidelines are principles-based, national supervisors could adopt them in different ways. "This could create some inconsistency in interpretation across the EU and consequently may represent a challenge for European insurance groups", he said. He concluded that a positive result from the trilogue talks would "ease fears around a further delay". Mr Garnsworthy said that it was therefore "important that insurers maintain their focus on delivering their programmes for a go live date of 2016".