- Significant win for the sector
- Large proportion exempt from SII for three years post implementation
A revised draft of the Omnibus II Directive was issued on 14 June 2011, which includes specific transitional arrangements for (re)insurance companies in run-off under Solvency II.
Mike Walker, head of KPMG’s UK insurance solutions team, commented: “The run-off sector has been lobbying for Solvency II concessions, arguing that the costs of implementation are disproportionate for their businesses. The concessions, which will lead to a significant proportion of the run-off sector being exempt for at least three years post implementation, will be broadly welcomed.”
The proposals only relate to (re)insurance undertakings which have ceased to write new (re)insurance contracts. They also apply to firms that are in some form of insolvency or restructuring procedure where an administrator has been appointed (where the exemption period proposed is five years). However, this is not a blanket exemption – in particular, companies that are part of a group will not be able to avail themselves of this exemption unless the entirety of the group has also ceased writing new (re)insurance contracts.
Janine Hawes, a director in KPMG’s Solvency II technical group, commented: “Given the proposal is for full exemption from all three pillars, there are inevitably conditions attached. Supervisors need to be comfortable that full termination will be effected within the period of the exemption, and they have the power to shorten that period if they are not satisfied with the progress being made. As part of monitoring this, firms will be required to provide the regulator with an annual report setting out what progress has been made in terminating its activity.”
Mike Walker continued: “There will be some run-off companies that will still need to comply with Solvency II and it is also not clear what additional evidence supervisors will require to support the progress that is being made towards terminating activity. However, the new transitional arrangements will clearly be welcomed by the vast majority of the run-off sector. As a consequence of the new provisions we are also likely to see run-off entities revisiting schemes of arrangement and other finality options in an effort to benefit from the new run-off exemptions.”
ENDS
For further information please contact
Monica Fiumara, Senior PR Manager, KPMG
Tel: +44 (0)20 7694 5674
Mobile: +44 (0)7901 105180
Email: monica.fiumara@kpmg.co.uk
KPMG Press Office: 020 7694 8773
About KPMG
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of £1.6 billion in the year ended September 2010. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 150 countries and have more than 138,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
