Man in the middle – Peter Skinner

AL: Are you happy with the progress of the Directive so far and do you think it will work to enhance competition and provide greater security for insurance buyers? PS: “It is a principles-based approach for a start which is a very positive basis. I am thrilled about aspects of Solvency II that have been achieved so far. It is not perfect, but I am pleased with where we have got to. There have been compromises. For example, many felt that the measurement of the Minimum Capital Requirement (the lowest capital threshold that triggers supervisory measures if breached) was produced because we only listened to the big multinational insurance companies. Many of the smaller companies felt they had not been listened to. But the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) carried out the biggest impact assessment to date for this Directive and received a huge response to its last consultation papers (some 20,000 in total). The fact is that such analyses will never be complete enough. You can always find more information.”hideAL: What were the key points of debate during last year and led to changes and compromises in the Level 1 Directive? PS: “It is the details upon which people disagree. This is partly because of differing cultures, different ways of assessing risks and modelling. Some are mono-line and local and some are multi-line and global. And there are different approaches to regulation. In many respects Solvency II is ahead of the game because it is a risk-based, economic approach that is designed to deliver the safest and most realistic method. There have been compromises at a technical level and I am keen to make sure that these variations do not destroy the industry or hamper it compared with other countries with different systems.” AL: A number of experts have stressed for a long time that the biggest potential problem with Solvency II is not necessarily with the calibrations but rather the implementation of the Directive at national level. It is feared that it simply will not be implemented in a fair and level way. How can you tackle this? PS: “We are inviting all regulators to provide advice about how they plan to implement Solvency II and how the technicalities of the Level 1 Directive could be validated. There will always be dangers when it comes to differing interpretations and outcomes that compromise the level playing field. So we are trying to organise hearings to ensure there is no retreat from the Level 1 principles. But this can be very difficult and different to what is eventually seen on the ground. Therefore what we want is a very close relationship with supervisors to ensure that it is dealt with beforehand. AL: Some insurance buyers have also said that they believe that they have not been adequately consulted in the process. Is that fair? PS: “There is clearly room for making sure corporate policyholders become very much more involved. There is no reason why they cannot be involved more as they need to actively make sure that their voice is heard. We will listen.” AL: Captive owners in particular feel that they may be unfairly penalised by Solvency II. Do you feel captives will be fairly treated? PS: “I think this area has been adequately dealt with. Some argued that they should be left out of the process but it is important that it is understood that they are not excluded. It is important that they are managed properly and I think they are. Currently I do not see a problem for them but I always keep an eye on this. The key is that we have a proportional and principles-based approach which allows for a more flexible manner of to supervision and important thing is partly to make sure people understand how things like captives work.” AL: What do you feel are the next big challenges for Solvency II as it nears the finishing line? PS: “There are a lot of outstanding issues and we are trying to resolve them. I will be the Rapporteur for the implementing measures and I will be trying to ensure that faith is kept in the Level 1 proposal. We need to keep as faithful to that as possible because it was a political agreement and so has the mandate to make this valid. This is a law that I am delighted to be at the centre of but it needs the right approaches from the supervisors and it needs to be approached uniformly.” AL: What about the rest of the world? How can Solvency II be made to work within the patchwork of international insurance supervisory standards, not least in the United States? PS: “To build a single market for insurance worldwide is a challenge for existing regimes. The U.S. market is supervised by 54 different states and regimes. For example, in December of last year the U.S. House Financial Services Committee passed a measure to create a federal national insurance information agency with some authority in the area of international insurance agreements [the new federal office does not, however, have any regulatory authority and would not be able to override state insurance laws]. This a step in the right direction and I congratulate Rep. Paul Kanjorksi who sponsored this measure and listened to me as it allows the U.S. to become involved in the debate for global standards. Mr Kanjorski understands and together we have been working hard to try and achieve further co-operation.”

Man in the middle – Peter Skinner

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