UK carriers looking to establish EU subsidiaries for Brexit face less room for manoeuvre after the European Commission (EC) issued plans to bolster the bloc’s financial regulators at the expense of national watchdogs.

The EC’s proposals would give the European Insurance and Occupational Pensions Authority (Eiopa) greater powers to promote “convergence” among national insurance regulators in the way they supervise internal models under Solvency II.

Eiopa and the other so-called European Supervisory Authorities (ESAs) would set EU-wide priorities for their respective sectors and vet how national watchdogs fulfil that remit.

The plans, part of the EU’s three-year-old Capital Markets Union project, elicited some accusations of a regulatory power grab, while Insurance Europe called for clarification of the proposed “material increases” in both Eiopa’s scope of activities and the new regime’s oversight mechanisms.

Mazars partner Sarah Ouarbya said that the proposed strengthening of central powers “should level the playing field even more across the EU”.

“Insurers that have chosen a country because they perceive the national regulator as being more pragmatic than others may find that advantage is lost over time,” she added.

Ouarbya also noted that references in the EC documentation to the delegation and outsourcing of business functions to non-EU countries could stymie some UK groups’ plans.

“Many banks and insurance companies are working on the basis that they will be able to delegate or outsource business functions back to the UK from their new EU hub,” she added. “These plans may be disrupted if additional barriers are put in the way and there is a distinction between EU and non-EU outsourcing.”

Herbert Smiths Freehill partner Geoffrey Maddock concurred.

“From firms’ point of view, the clear concern will be that once Eiopa has exerted greater control over this area, it will be able to make life increasingly difficult for groups who wish to retain most activities in the UK by means of reinsurance/outsourcing,” he said. “So the key will really be what actual behaviour follows from Eiopa, and whether it is reasonably based on legitimate financial stability/policyholder protection grounds or is more motivated by protectionist anti-third country objectives.”

Last week’s proposals follow edicts from the European Securities and Markets Authority (Esma) and Eiopa designed to stamp out the creation of “letterbox” entities within the EU to house UK subsidiaries.

Under the latest proposals, the ESAs would take decisions more independently from national interests, with newly created executive boards speeding up the decision-making process.

Funding of the ESAs would also be separate from the national supervisors to ensure independence.

The EC said there would be a mechanism for interested parties to appeal to the EC if a majority think the ESAs have overstepped the mark.

In issuing the proposals the EU executive abandoned the prospect of a merger of the European Banking Authority and Eiopa – a concession that Insurance Europe welcomed.

Also on the positive side, Ouarbya said that UK insurers would generally welcome more consistency in the way that internal models are validated across the EU, given the Prudential Regulation Authority’s tough reputation in this regard.

The proposals take the form of an omnibus text, which amends existing legislation.

They will now be discussed by the European Parliament and the European Council.

The EU securities and markets regulator has warned national watchdogs against companies hoping to set up thinly staffed “brass plaque” entities ahead of Brexit.

In an advisory statement aimed at national EU regulators, the European Securities and Markets Authority (ESMA) issued guidelines for avoiding “regulatory arbitrage” between the 27 countries that will be left in the EU after the UK leaves the bloc.

ESMA said local regulators in the EU should “reject any relocation request creating letterbox entities”.

This would include a company looking to set up an EU operation to gain passporting rights while “essentially performing all substantial activities or functions outside the EU27″, ESMA said.

Paris-based ESMA works with the European Insurance and Occupational Pensions Authority and the European Banking Authority to promote “supervisory convergence” across the EU.

In its document, ESMA chairman Steven Maijoor said: “The UK plays a prominent role in EU financial markets and the relocation of entities, activities and functions to the EU27 creates a unique situation requiring a common effort, at EU level.

“Firms need to be subject to the same standards of authorisation and ongoing supervision across the EU27 in order to avoid competition on regulatory and supervisory practices between member states.”

The watchdog said it expects senior executives in newly established EU units to be actual decision-makers. ESMA noted that even when the entity is part of a bigger corporation, local board members and senior managers must be employed in the country they move to.

ESMA also urged financial services firms to hurry up with Brexit relocation plans.

“The authorisation process takes time,” the watchdog noted. To ensure efficiency, ESMA recommended companies approach local regulators “as early as possible”.

ESMA’s intervention comes as carriers weigh their post-Brexit location options, and it could curtail the benefits of shopping around.

Although all EU member states are bound by the same Solvency II requirements, national jurisdictions have diverged on staffing requirements, carriers have said.

Lloyd’s has already decided to set up an EU subsidiary in Belgium, while AIG is setting up a new European headquarters in Luxembourg, as are FM Global and Hiscox.

No major carrier has yet announced plans to relocate to Dublin, where staffing requirements are perceived to be more stringent.

The ESMA document called for local regulators to dismiss applications for licences from financial services companies looking for a laissez-faire regulatory regime.

Regulators should veto applications “where the activity carried out indicates clearly that the entity has opted for the legal system of a member state for the purpose of evading the stricter standards in force in another member state”.

AM Best has said it will not directly use Solvency II results in its rating assessments over concerns the regime does not provide an accurate picture of carriers’ balance sheets.

In a statement released today to coincide with the first solvency and financial condition reports under the new regulations, the rating agency said while Solvency II represented the European regulatory position and is intended to be risk-based, it would instead continue to use its internal Best’s Capital Adequacy Ratio (BCAR) model.

It said: “It is AM Best’s opinion that [Solvency II] may not provide a reliable picture of the underlying economics of an insurer’s balance sheet at either the detailed or corporate level, and neither does it provide comparisons across insurers on a global basis.”

The agency added that it did not believe the quantitative data of the entire regime gave a “complete picture of a company’s credit risk”, much less a single ratio.

However, it noted that data from the regulations could influence the inputs into the BCAR model, particularly information related to available capital in life insurance operations for European carriers.

While the regime has led to an increased burden for all European (re)insurance subsectors, life insurers are set to be the most heavily impacted by the changes, AM Best said.

Fellow ratings agency Fitch said in early 2016 it would also opt not to use Solvency II metrics in its ratings as it said the data was not comparable between insurers because of the varied calculations in use.

Successful City Based US Insurance Company requires a Qualified Accountant with Insurance experience to join their growing Finance team.

• Prepare the annual and quarterly Solvency II Pillar 3 returns.
• Assist in the preparation of reinsurance returns (combined with Pillar 3 reporting).
• Work as part of the team to meet all external reporting obligations.
• Work with the actuarial department over the Standard formula calculations for each entity.
• Have the ability to build on a data store working with IT to capture all Pillar 3 data requirements and aid reporting processes to become more efficient.
• Keep up to date with any changes in reporting requirements arising from regulatory or business expansion.
• Ensure ready for 2017 reporting, including annual Pillar 3 reporting.

 Candidates should be Qualified with Insurance experience and Solvency II.

This role will be supporting the Solvency II team in accounting policy and the completion of the implementation of Solvency II Pillar 3 for a major London based insurance business.

Working within a highly specialised Solvency II team to ensure the completion of the implementation of the Solvency II Pillar 3 (supervisory reporting and disclosure) regime across Lloyd’s syndicates.  This includes ensuring that the business meets its Pillar 3 reporting requirements as the insurance industry moves into ‘live’ Solvency II from 2016.

• Qualified Accountant
• Good understanding of insurance and Lloyd’s market financial and regulatory reporting, including Solvency II Pillar 3
• Good Understanding of Solvency II
• Good technical knowledge or UK GAAP/IFRS
• Knowledge /experience of Lloyd’s returns
• Advanced knowledge of Excel and Access

This role is instrumental in completing the implementation of the Solvency II Pillar 3 (supervisory reporting and disclosure) regime along with developing accounting policy for an industry leading insurance business.

Completing the implementation of the Solvency II Pillar 3 (supervisory reporting and disclosure) regime to ensure syndicates meet Pillar 3 reporting requirements as Lloyd’s move into ‘live’ Solvency II from 2016.

Developing accounting policy, including assessing the impact on the developments in UK and international accounting standards for financial and regulatory reporting, with particular reference to IASB’s IFRS Phase II project.

• Qualified Accountant
• Detailed understanding of insurance and Lloyd’s market financial and regulatory reporting, including Solvency II Pillar 3
• Good understanding of Solvency II as a whole
• Excellent technical knowledge of UK GAAP and IFRS
• Knowledge /experience of Lloyd’s Core Market Return systems
• Advanced knowledge of excel and access

Overview

Annual and Quarterly Filing to the regulator for Solvency II for all entities. This will also involve assisting in the development of internal systems to efficiently produce pillar 3 reports as well as helping with the implementation and testing of Solvency II specific systems due to be introduced.

Overview of outsourced Gibraltar insurer accounting process including quarterly reconciliation between US GAAP and locally reported results.

Specific Responsibilities

• Assist in the development of solvency II infrastructure to meet the reporting requirements as efficiently as possible.
• Production of quarterly Solvency II returns.
• Production of annual Solvency II returns.
• Quarterly reconciliation on Gibraltar insurer to reconcile US GAAP result to locally reported result.
• Quarterly report on foreign exchange exposure including analysis of quarterly movements.
• Assist with branch reporting to Head Office, including detailed analysis of significant variances.
• Provide tax return data for international branches and manage tax ledgers.

Skills & Experience Required

• CIMA qualified accountant or finalist.
• Advanced Excel skills.
• Experience of Sun preferable.
• Strong analytical and review skills.
• Able to work on own initiative.
• Insurance/Reinsurance experience preferred.
• Strong communication and presentation skills.

Insurers are extremely concerned with last minute requirements being made of them ahead of Solvency II implementation on 1 January, according to a survey from industry trade body Insurance Europe.

A poll that covered companies accounting for 90 percent of European insurance premiums found that respondents were worried that guidelines necessary to comply with pillar 3 of the regime would only be adopted by the European Commission this September – four months before Solvency II comes into force.

Pillar 3 lays out standards on disclosure and reporting and the final version of the quantitative reporting templates (QRT) are required in order to comply with it.

Insurers will need to post interim QRTs annually or quarterly, depending on what type of firm they are.

Other concerns included the possibility of a flurry of applications for approval being submitted at a time when supervisors’ resources were already stretched, as well as extensive documentation requirements delaying the approval process of internal models. Nearly all respondents warned that supervisors’ demands in this latter area were too burdensome.

Insurance Europe added that work to comply with further requirements set by member states was slowing down the implementation process, with several respondents reporting that their member state was “gold plating” Solvency II when transposing it into national law.

However, the federation said that a clear majority of firms were making good progress in implementing the first two pillars of Solvency II and that most insurers felt that risk management and governance had already improved through introducing the new regime.

Insurance Europe head of prudential regulation Igotz Aubin said that the progress towards implementing Solvency II made by European insurers was encouraging given the challenging time for the industry at present.

“While the industry shares the aims of Solvency II, policymakers and supervisors must also appreciate the significant burden which its implementation is placing on insurers,” he said.

“The European Insurance and Occupational Pensions Authority and local supervisors should therefore avoid imposing last minute requirements and interpretations which add to that obligation,” he added.

Well known City based Insurance Company and Managing Agency with Syndicates requires a Senior Solvency II Risk Analyst to work within risk management department to ensure the Risk Management Framework is appropriately implemented and followed in accordance with the agreed policy.

Key Responsibilities:

• To support the development, implementation and monitoring of ERM systems and processes.
• Support end to end ERM responsibilities for syndicates
• Support the Annual and ad hoc ORSA processes with direction from the CRO. Responsibility for drafting the standard report templates for submission to the boards and regulators
• Support to CRO in keeping all risk owned policies and procedures up to date as required and in line with annual review processes. Support to CRO in creation of new risk policies as required
• Support the CRO in effectively meeting existing and implementing new regulatory requirements by the relevant deadlines (e.g. Lloyd’s min standards self assessment, Solvency II, conduct risk, etc.).
• Consider results of internal audits, compliance reviews and third party reviews for consideration in risk identification and assessment.

Required:

• Previous relevant risk experience in the UK non-life insurance sector at a similar level which will include a good knowledge of Solvency II requirements.
• Educated to degree level and/or risk management qualification
• A high level understanding of capital models
• Experience in using Magique or an equivalent risk management system, and using Microsoft Office and other tools to prepare management reports and presentations.