After a series of political challenges and delays, the majority of amendments put forward by the Solvency II Economics and Monetary Affairs Committee (ECON) have been approved by the European Parliament.

Commenting on today's vote, Paul Clarke, global Solvency II leader at PwC, says: “Many insurers view the inclusion of a matching adjustment under Solvency II as essential for their ability to offer affordable long-term annuity products. While it is positive that the amendments approved today include a version of this concept, it remains to be seen whether this will address all of the industry’s concerns.

“If an agreement can be reached on matching adjustment that is acceptable to both policy makers and the industry this would be a significant win, not just for the insurance industry but for consumers, as it should avoid reductions in the range of long-term annuity products on offer and increases in product prices.

“However, as always the devil is in the detail and the industry will be keeping a close eye on the finer details as they emerge over the coming weeks. In particular, progress on the discount rate, equivalence, transitional measures and reporting thresholds. It is vital that the European Parliament, European Council and European Commission now work together to reach a quick conclusion. The quicker agreement is reached at this level, the sooner the industry and national supervisors can move ahead with addressing the various challenges that will come out of the implementing measures.”

A statement from Ernst & Young presents a similar response – citing the development as one that will bring a "welcome increase in the level of confidence that the demanding remaining timeline for the introduction of Solvency II can still be met". What may be less welcome, they point out, are some of the details in the latest compromise, particularly in the areas of long term financial guarantees and equivalence.

“Arrangements for valuing long term financial guarantees have been subject to extensive debate in recent weeks, however the approved text ignores many of industry's proposals and introduces some further restrictions to the approach suggested by the European Commission in October 2011. By including this level of technical detail in the Omnibus II directive, we note that the scope for making changes to this regime in the future is curtailed.

“Companies affected by the arrangements for equivalence may be disappointed too; EU members states gain the right to not recognise equivalent group supervision and the criteria for granting temporary equivalence has been strengthened, potentially precluding the USA,” says the firm in a statement.

Deloitte, too, has welcomed the vote. Says Michel de La Bellière, Solvency II lead partner – Europe: “Deloitte welcomes today’s vote by ECON Committee on the Omnibus II Directive. By reaching a compromise on crucial issues, the Committee has overcome an important obstacle on the way to implement Solvency II on 1 January 2014. Deloitte will continue to work with our clients across Europe to help them successfully meet this deadline, and embed the final details of the regulation still to be defined by the European institutions and EIOPA.”

With a UK remit and perspective, Solvency II lead partner at the firm,Rick Lester, adds “This is a critical step towards the scheduled vote that will take place in the summer between the European Parliament, Commission and Council of Ministers. It will offer some relief to UK insurers – who have invested heavily in Solvency II and have committed to implementation in line with the planning assumptions set down by the FSA – that there is a real desire to find a solution to the outstanding issues, and that an effective date for insurers from the start of 2014 is still viable.”

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