Politics 10 June 2013 An object lesson in how not to make law Solvency II debate reflects a frustration with EU politics. Sign up for our weekly email * Print HTML Solvency II, the forthcoming regulatory directive for Europe, has been labelled as “an object lesson in how not to make law”. Steve Webb, UK’s Minister for Pensions, turned up the heat on the insurance space last month when he called the European Union to abandon the new changes that are being proposed by Solvency II, the ever-delayed package of regulatory guidelines that will shape the insurance business in the EU in the next few years. His concern had particularly to do with the effect of Solvency II on benefit pension schemes. According to a working paper by the European Insurance and Occupational Pensions Authority (EIOPA), the new regulatory changes could add a cost of £450bn to pension schemes. Leaving no room for doubt he added: "any such new rules would harm businesses’ ability to invest, grow and create jobs, and many more schemes could be forced to close. I continue to urge the Commission to abandon these reckless plans". Other heavy weights in the British government have expressed their concerns too. Andrew Tyrie, chairman of the Treasury Committee, has revealed his ill-feeling on Solvency II, following a lengthy debate with the chief of the new Prudential Regulation Authority (PRA) Andrew Bailey. Days before Webb’s statement, Tyrie said “Strengthening and harmonising the prudential regulation of the insurance sector across the EU could bring significant benefits. But we haven’t seen any yet. Even now, no one can be sure what it will add”. Andrew Bailey had labelled the process the EU has followed on Solvency II as “shocking” and the costs arising from the delay in its implementation as “staggering”. The UK insurance industry is the third largest in the world and a key activity of the UK economy. So it is only reasonable that the local watchdog, and other involved government officials, will express their concerns on any changes that are likely to affect consumers and hinder the development of the business locally. However, the criticism is also reminiscent of the current mood with the way a relevant part of Britain feels policies are being carried out in the EU. The sentiment is that well intentioned and necessary reforms, drag indefinitely under the hand of the EU and become so cumbersome that can make the problem it came to address worse. Britain will hold a referendum to decide whether it remains a member of the EU by the end of 2017, that is in four years time. The deadline of Solvency II has consistently been postponed from November 2010, to November 2012, then January 2013 and January 2014. Now, it is not likely to happen before January 2016. The chance of a sharp u-turn on the envisioned Solvency II regime seems unlikely, considering how EU’s policymakers have acted in recent years. By the time it comes into place, the UK might feel comfortable enough with its Individual Capital Adequacy Standards regime, just when it needs to decide how convenient it is to remain in the EU. › The mining industry is about to fall into a very deep hole Photograph: Getty Images Carlos Pallordet is a writer for Timetric Subscribe from just £1 per issue More Related articles Jeremy Corbyn has found a vulnerable spot on Theresa May and trade Politicians are worried that their pensions are destroying the planet. Is yours? Nap Store: Where did all these new mattress start-ups come from?