FSA chief executive Hector Sants has hinted the deadline for implementing Solvency II could be relaxed, and has suggested the UK regulator will take a pragmatic approach to firms who are not ready in time.
Insurers across Europe are due to implement the Solvency II rules, which address insurers’ capital requirements and risk management practices, by January 1, 2013.
Insurers are also having to comply with the RDR and the European Court of Justice ruling banning gender-based pricing within a similar timescale.
Sants (pictured), who gave a speech at the Association of British Insurers’ biennial conference in London yesterday, was asked by a delegate what penalties firms will suffer if they are not ready for Solvency II in time and what will happen if a large number of firms fail to meet the deadline.
Sants said: “We expect firms to be ready. Until the Commission changes the deadline we continue to expect firms to be ready for the deadline even if it is obviously recognised that the Commission is giving consideration to whether that deadline is achievable.”
Sants pointed out that if Europe did decide to change the deadline, the UK regulator would change its implementation deadline accordingly.
But he added: “I would draw your attention to the fact that in respect of previous directives, we have always been pragmatic and careful in how we respond to somebody not being ready for legitimate and understandable reasons. That is slightly ambiguous and deliberately so.”
Sants also called for regulators to consider whether a special resolution regime, the orderly winding down process in place for banks, should also be developed for insurers.
His comments on Solvency II follow an article that appeared in the Financial Times earlier this week, which suggested a delay to implementing Solvency II was likely as the European Commission is seeking to secure a “soft transition” to the rules.