9. Ideology of the Form: Solvency II Versus Solvency I and Basel II

O’Donovan (2011), p. 4; Wandt and Sehrbrock (2011), pp. 923–930; Grazia Starita and Malafronte (2014), p. 19; Vansweevelt and Weyts (2016), p. 201; Floreani (2016), p. 261.

O’Donovan (2011), p. 4.

COM(02)2519 [Commission document nr. 2519 of 2002], 2 and 4-7; Visscher et al. (2008), pp. 20–21. Also, see Müller and Selvig (2008), p. 56.

O’Donovan (2011), p. 4.

Visscher et al. (2008), p. 22.

More precisely, in principle, the application of the Lamfalussy process to legislation regarding the insurance and banking sectors was approved in July of 2002: DG MARKT/2532/o2 [Document nr. 2532 of Directorate-General MARKT of 2002], 3.

Visscher et al. (2008), p. 23.

Grazia Starita and Malafronte (2014), p. 19. This is due to the fact that the Lamfalussy process differs according to the financial sector: Visscher et al. (2008), p. 23. As such, insurance sector, level 1 concerns overall framework principles (Solvency II); level 2 concerns detailed implementation measures (implementing measures); level 2.5 concerns detailed technical measures (technical standards); level 3 concerns guidelines to enhance supervisory convergence (supervisory standards); and level 4 concerns monitoring compliance and enforcement (evaluation): Grazia Starita and Malafronte (2014), p. 19.

COM(02)2519 [Commission document nr. 2519 of 2002], 2 and 4-7.

Van Hulle (2008), p. 1030.

Van Hulle (2008), p. 1031. The QIS have been conducted by different actors. These QIS are available to the public through the website of the European Commission (2017b): http://​ec.​europa.​eu/​finance/​insurance/​solvency/​solvency2/​impact/​index_​en.​htm. The five QIS conducted by EIOPA specifically are available on EIOPA’s (2017) website: https://​eiopa.​europa.​eu/​Pages/​QIS/​Quantitative-Impact-Studies.​aspx.

The Better Regulation package is supposed to introduce a set of tools (and an institutional apparatus) with the goal of engaging stakeholders in the decision-making process for all EU bodies at different stages: Marano and Siri (2017), p. 15. The following document of the European Commission can be consulted for more information on REFIT: COM(12)746 final [Commission document nr. 746 of 2012, final version]. For more information on the better regulation strategy of the European Commission (2017a) the following website of the European Commission can be consulted: http://​ec.​europa.​eu/​smart-regulation/​better_​regulation/​key_​docs_​en.​htm#_​br. Succinctly, REFIT “makes sure that EU laws deliver their intended benefits for citizens, businesses and society while removing red tape and lowering costs. It also aims to make EU laws simpler and easier to understand.” European Commission (2017c): https://​ec.​europa.​eu/​info/​law/​law-making-process/​evaluating-and-improving-existing-laws/​refit-making-eu-law-simpler-and-less-costly_​en.

Dreher (2015), p. 5.

Van Hulle (2011), p. 912; Dreher (2015), p. 17.

Dreher (2015), p. 5.

Dreher (2015), p. 6.

Dreher (2015), pp. 6–10.

Dreher (2015), pp. 6–7.

Dreher (2015), p. 10. Contrariwise, according to Illegems, Marano and Burling, respectively, Solvency II provides for maximum harmonization: Vansweevelt and Weyts (2016), p. 200; Marano and Siri (2017), p. 9; Burling (2017), p. 79. However, it is Dreher not clear how Illegems, Marano and Burling, respectively, conceptualize maximum harmonization. As pointed out earlier, it can very well be that what he designates as full harmonization has been designated as maximum harmonization by Illegems, Marano and Burling, respectively. As such, the difference between their views on the type of harmonization of Solvency II is terminological rather than conceptual. This difference is a good illustration of the importance of definitions as explicated in the beginning of the first part of the monograph (See Chap. 2). Furthermore, Wandt and Sehrbrock agree with Dreher as they have pointed out that “[d]espite of the fact that Solvency II is a full harmonisation directive and the Member States are obliged to transpose the provisions into national law without any deviations (…), the latter remain competent to implement national rules in areas where the directive sets out no provisions at all.”: Wandt and Sehrbrock (2011), p. 924 (personally added underlineation).

Dreher (2015), p. 4.

O’Donovan (2011), p. 4.

COM(09)502 final [Commission document nr. 502 of 2009, final version], 2.

Directive of the European Parliament and of the Council nr. 2010/78/EU, 24 November 2010 amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC/2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority), Pb.L. 15 December 2010, episode 331, 120 (hereinafter: Omnibus I).

Van Hulle (2011), pp. 919–921; O’Donovan (2011), p. 10.

Grazia Starita and Malafronte (2014), p. 19.

Wandt and Sehrbrock (2011), p. 930. Paul Windels (Assuralia) has also mentioned the neglect of the democratic power in Solvency II due to the Lamfalussy process in an interview—that took place over the phone on the 9th of January 2018.

Marano and Siri (2017), p. 16.

Visscher et al. (2008), pp. 34–38.

According to Marano, stakeholders (who can afford it) have been necessitated to be organized in order to have a proactive approach in the dialogue that leads to changes in legislation as the contemporary legislative process has an increasing transnational dimension to it: Marano and Siri (2017), p. 16.

Marano and Siri (2017), p. 17.

Kwak (2014), p. 254.

The QIS of Basel II can be accessed on the following website Bank for International Settlements (2017): www.​bis.​org/​bcbs/​qis/​overview.​htm. The QIS of Solvency II can be access on the websites that were mentioned earlier in this chapter.

Art. 288 TFEU.

Art. 288, section 3 TFEU.

Basel Committee on Banking Supervision, Charter, Basel, 2013, 3 (hereinafter: BCBS charter).

BCBS charter, 1. The BCBS thus operates without any kind of formal authority, constitutions of by-laws. Its operations are based on the terms of the founding charter aptly referenced: Walker (2001), p. 45.

BCBS charter, 4.

Taylor (2004), p. 123. To confirm this state of affairs one does not need to look very far. Basel II’s official title says more than any explanation ever will: International Convergence of Capital Measurement and Capital Standards. The difference between harmonization and convergence is that the latter is about creating one set of rules or standard whereas harmonization is about the elimination of the difference between rules or standards. More precisely, in the words of Solvency II, “it is necessary to eliminate the most serious differences between the laws of the Member States as regards the rules to with insurance (…) undertakings are subject.”: Consideration 2 Solvency II.

Walker (2001), p. 78.

BCBS charter, 5-6.

De Bellis (2012), pp. 106–107. Marano has made the same point: Marano and Siri (2017), p. 18.

De Bellis (2012), p. 106. In fact, the BCBS “is perhaps the most important example of a transgovernmental regulatory network that exercises vast powers, seemingly without any form of democratic accountability.”: Barr and Miller (2006), p. 17.

Directive of the European Parliament and of the Council nr. 2013/36/EU, 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, Pb.L. 27 June 2013, episode 176, 338 (hereinafter: CRD IV).

In this monograph, unless otherwise indicated, soft law and its rules are synonymous to non-mandatory or non-binding rules. For those interested in the origin, possible uses and meaning of soft law, especially in the context of finance, see: Walker (2001), p. 2. For a more concise explanation of soft law in the field of financial law, see: Lastra (2006), pp. 453–474.

Art. 2 section 1 Regulation EIOPA.

Art. 1(2) Regulation EIOPA.

Art. 1(6) Regulation EIOPA.

Art. 30(1) Solvency II directive.

Art. 2(1), first paragraph Solvency II. Solvency II to also applies to reinsurance undertakings—art. 2(1), second paragraph—but this falls outside of the scope of this research.

Art. 2(1), (a) Directive of the European Parliament and of the Council nr. 2002/83/EC, 5 November 2002 concerning life assurance, Pb.L. 19 December 2002, episode 345, 11; Art. 2(1), (a) Directive of the Council nr. 72/239/EEC, 24 July 1973 on the coordination of laws, Regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life insurance, Pb.L. 16 August 1973, episode 228, 4.

Cousy and Dreesen (2009), p. 149. In this monograph such terminology is used as guiding principles and detailed rules. This terminology should be understood in the light of the distinction between principles-based law, also known as the principles based approach, and rules-based regulation, also known as the rules-based approach: Wandt and Sehrbrock (2011), p. 931; Cousy and Dreesen (2009), p. 149. According to Wandt and Sehrbrock rules-based regulation (rules-based approach) is primarily governed by detailed statutes (articles) whereas principles-based law (principles-based approach) is primarily characterized by general, vague legal terms: Wandt and Sehrbrock (2011), p. 931.

Wandt and Sehrbrock (2011), p. 931.

François (1999), pp. 131–133. Another way of describing principles in a legal context is to refer to them as open norms (that are characterized by the different ways in which they can be interpreted): Zippro (2009), p. 47. Perhaps it should be noted that since the Solvency II system has been created in accordance with the Lamfalussy process it combines vague and general legal terminology together with technical language. This combination is nothing novel in financial law as François already spoke of it in 1999: François (1999), p. 131.

Wandt and Sehrbrock (2011), p. 924.

Van Hulle (2011), p. 912; O’Donovan (2011), p. 13; Lorent (2008), p. 24; Denters (2011), p. 44.

As a policy option, the EU legislator has opted for an adjusted and a more harmonized Basel II three pillar approach to Solvency II. The three pillars of Basel II were therefore not just copied into the Solvency II directive: SEC(07)871 [Internal document of the Secretariat-General nr. 871 of 2007], 80-85.

O’Donovan (2011), p. 5.

Art. 310 Solvency II.

A recast follows the structure of the existing directives and, thus, does not involve a complete rewrite: COM(08)119 final [Commission document nr. 119 of 2008, final version], 3. As such, Solvency II’s recast should be seen as a legislative clean sweep that integrates 14 Solvency I directives into one all-embracing piece of legislation: Wandt and Sehrbrock (2011), p. 927.

COM(15)3120 [Commission document nr. 3120 of 2015], 1; COM(08)119 final [Commission document nr. 119 of 2008, final version], 2; Vansweevelt and Weyts (2016), p. 200.

Consideration 1 Solvency II.

Wandt and Sehrbrock (2011), p. 927.

Van Cauwenberge (2008), pp. 895–911.

Van Cauwenberge (2008), pp. 918–919; Cousy and Dreesen (2009), p. 152. In doing so, both the European legislator and the BCBS have followed the British (abolished) FSA which has introduced principles-based law in the fields of finance: Van Cauwenberge (2008), pp. 894–895; Wandt and Sehrbrock (2011), p. 931.

Wandt and Sehrbrock (2011), p. 931.

Gup (2011), p. 195.

Namely, the first title of the Solvency II delegated regulation is as following: Title I Valuation and Risk-Based Capital Requirements (Pillar I), Enhanced Governance (Pillar II) and Increased Transparency. See: Delegated Regulation of the Commission r. 2015/35, 10 October 2014, supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), Pb.L. 17 January 2015, episode 12, 1.