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The FSA, following consultation in June 2006, has now completed a number
of amendments to the Handbook for the purposes of implementing the EU
Reinsurance Directive (RID) which came into force on 10 December 2005
and must be implemented across the EU by 10 December 2007.
Until now there have been no EU directives exclusively relating of the
prudential supervision of reinsurance business, although the UK has
broadly carried over the requirements of existing direct insurance directives
to reinsurers.
The RID is an interim measure that introduces a minimum level of harmonised
prudential supervision of reinsurance across the EU, in advance of a
wider directive that will apply to all insurers, known as Solvency II.
The European Commission intends to create a single European market in
reinsurance and remove remaining barriers to trade within the EEA that
arise from the existence of varied supervisory regimes cross the single
market area. Under the RID, each reinsurer will be supervised by the
competent authority in its home state and will be able to operate throughout
the EEA on that basis. The RID also allows member states the option
to establish an insurance Special Purpose Vehicle (ISPV) market.
Following publication of a consultation paper in June 2006, the FSA
published feedback on the consultation in September 2006. The FSA reported
that it received substantial support for its proposed approach to implementing
the RID. The FSA indicated that nearly all of its proposed rules would
therefore remain unchanged from the rules presented in the draft legal
instrument in Appendix 1 to the consultation document, CP06/12. The
necessary changes to the Handbook were subsequently implemented by the
end of 2006.
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