Ceiops is dead, long live Eiopa!

There are still a few days to get applications in, but getting the jobs could be the easy part; the positions - chair and executive director of the new Europe-wide supervisor for insurance and occupational pensions - will be among the most powerful in the insurance sector.

Yet the heads of the European Insurance and Occupational Pensions Authority will have to answer to a board of the national supervisors of the 27 European Union states, and ultimately the European Parliament. They will also have to push for fair treatment for insurance in the EU's beefed-up supervisory regime for all financial services that has been set up to prevent future financial crises.

Transformation time
Existing committees of EU supervisors are being transformed from 1 January 2011 into supervisory authorities with firm powers. Eiopa will supersede the current European Insurance and Occupational Pensions Supervisors, which currently has no binding powers, and sit alongside the new European Banking Authority and the new European Securities and Markets Authority. Also new will be the macro-level European Systemic Risk Board, which will monitor risks to the stability of the whole financial system.

The regime will also have to be meshed with the coming Solvency II risk-based prudential regulation system being introduced for EU insurers.

Binding authority
According to Gabriel Bernadino, Ceiops chair and general director for development and institutional relations at Portugal's insurance supervisor: "The new authorities will have the ability to develop draft regulations, rules and standards, which will be binding at the European level, and also to issue guidelines and recommendations that will be applicable by supervisors and others. So I think this will contribute to convergence [around the EU]."

All EU insurance firms will be affected, he says, with Eiopa's powers touching many areas, including customer protection, transparency, training and standards: "Eiopa will be the hub where supervisors working together can facilitate delegations of tasks and responsibilities, for example, and can have better training programmes."

Prevention powers
Peter Skinner MEP, the European Parliament's Eiopa rapporteur, says: "For the first time ever we have a body with the power to ensure EU rules are being followed in each member state - this will greatly improve the integration of financial services and the financial safety of European citizens." He cites Eiopa's power to settle disagreements between national authorities through direct contact with insurers and to act quickly to prevent financial meltdown as important to this.

While Sharon Bowles MEP, chair of the parliament's Economic and Monetary Affairs Committee, adds: "There is going to be a common rule book across Europe. So that has to be good for investors." However, the new approach, which she claims will follow much of the UK's practice, will still need local regulation: "Hands-on people will still have to be in London for the UK."

Proportionate regulation
Jenny Margetts, head of regulatory risk and compliance at RSA, expects lower compliance costs and simplified regulatory change, but is worried that "the scale and complexity of regulation" will increase and not remain "proportionate to the risks" in delivering "appropriate consumer protection and financial stability".

She adds: "It will be important for both Eiopa and the national regulators to play their parts in a co-ordinated and joined-up way, and to avoid duplication and any build-up of regulatory costs."

However, a spokesman for Dutch insurer Aegon, says: "A lot of the issues ... are still in discussion or in preparation and are, therefore, difficult to assess."

Digesting the news
"Most of the clients I have spoken to are still trying to digest this," adds Ashish Goel, associate vice-president for insurance, healthcare and life sciences in western Europe at consultancy and IT services firm Infosys.

And as well as details to be confirmed there are a few niggles remaining. Mathew Rutter, a regulatory partner at UK-based law firm Beachcroft, also notes clients' concerns that supervisors of small EU markets, as part of Eiopa, will be able to control practices that they never encounter locally.

Policy in practice
Yet, with the dropping of proposals for EU-wide stability and insurance guarantee funds, to the sector's relief, insurers may see little change in practice, says Alberto Corinti, deputy director general of Europe's insurance and reinsurance federation the CEA: "I don't think the new supervisory architecture will change companies' operations." However, the EC still plans to propose EU legislation on national insurance guarantee schemes, he says.

"I don't think that we should be looking at it in terms of costs, we should look at it in terms of being better," says Ms Bowles. "I can't see that it's going to drive up costs." Although she admits that Solvency II and the G20 agenda on compliance will impose more costs.

Cross-border benefits
Mr Bernadino adds: "For companies that have cross-border business it is more important and ... it will facilitate the management of their business."

In fact by avoiding regulatory protectionism, Ms Bowles says: "There may well be growing cross-border activity." And Mr Goel also sees the real benefits flowing to large firms able to use standard systems across Europe.

National worries
Worries have been raised, however, that Eiopa would throw its weight around in national markets. "Our concern was, because it had been charged with, for example, reconciling national views between supervisors, it could overlap certain responsibilities given to group supervisors under Solvency II," says Mr Corinti, although the final powers agreed for Eiopa have largely assuaged those fears.

The new, Frankfurt-based, ESRB will face an extremely difficult role and will get no credit for averting crises, says Mr Rutter. "Perversely you could have a false sense of security," he says. "You may think that they haven't cried wolf as there is no wolf. Of course, the converse danger is that they cry wolf too many times and people either ignore them or you end up stifling innovation, making it impossible to provide financial services for a lot of people because the costs price a lot of people out."

Banking heavy
The insurance sector argues that it carries no systemic risk and is unhappy about having only one representative on the banking-heavy, board of the ESRB, which could, for example, change financial rules without understanding the potential effects on insurers' huge investments.

However, Mr Bernadino says that Ceiops is working with the ESRB's preparatory secretariat to ensure that the board has enough people with insurance and pensions knowledge: "I am pretty confident [that will happen]."

Resource concerns
Also, there are worries that the new bodies will not have enough resources. "The issue of resources is a real issue," says Mr Corinti, who adds that the timetable for setting up the new bodies is challenging.

Ms Bowles comments: "From the parliament's side we would like these agencies to have more resources. They are still going to be pretty small for the tasks they have to do." Yet they will not handle day-to-day hands-on regulation: "They will make rules and deal with conflicts referred to them."

But ultimately the test for Eiopa will be what it does with its power, as Mr Bernadino concludes: "I firmly believe that what we need to see is an institution that applies all of its power."