The European Commission has today set out which countries it has asked EIOPA to assess for transitional equivalence during 2012. This process will ultimately determine which countries are deemed to have a regulatory system which provides enough policyholder protection that companies will not have to comply with both Solvency II and local regulations.

It is likely that these countries will have five years to embed any identified changes to their regulatory system from the point Solvency II becomes effective.

"It is an important step for companies to know which countries will be included in the transitional equivalence assessments," says Paul Clarke, global Solvency II leader at PwC. "Global insurers with operations in the identified countries will be watching this closely as equivalence will mean they avoid the costs and burden of having to comply with their local regulation and Solvency II.

“One area where the industry is eagerly awaiting more detail is how the US will be assessed. The Commission has made it clear that a different approach for equivalence will need to be adopted for the US, but does not provide any additional details on what this means in practice. Given the importance of the US market to many international insurers, it is vital the debate on US equivalence continues to be given adequate attention.

“It is encouraging that the Council and Parliament agree on the concept of transitional equivalence, but until the amendments to Omnibus II have been agreed it is uncertain what the final equivalence criteria will be against which EIOPA will undertake these assessments throughout 2012. This again highlights the importance of avoiding any additional delays to the Economic and Monetary Affairs Committee (ECON) vote, as insurers are desperately seeking more certainty on key topics so they can progress their Solvency II projects.”

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