Making it official that Solvency II will be delayed until 2016 brings greater clarity for insurers and reinsurers preparing for the rules, but another group's proposal to establish global risk-adjusted standards and capital backstops for major insurers and reinsurers could add complexity and costs for insurers.

Earlier this month, European Commissioner Michel Barnier said the official start date for Solvency II had been pushed back from January 2014 to January 2016.

While he's always supported the updated rules for European financial institutions, Mr. Barnier said in a statement that implementing the changes next year is “simply no longer tenable.”

He said he had obtained assurances from the European Council of Ministers and the European Parliament that they would not seek to change the 2016 start date.

However, a proposal for a potentially different set of rules affecting the largest insurers and reinsurers in the world emerged later in the month.

The Basel, Switzerland-based International Association of Insurance Supervisors said that it would develop a global insurance capital standard by 2016 that would be fully implemented by 2019 (see related story).

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Paul Clarke, partner and global insurance regulatory leader at PricewaterhouseCoopers L.L.P. in London, moving the Solvency II start date to 2016 was encouraging for the industry and reflected policyholder confidence that a resolution to outstanding disagreements — notably, the treatment of long-term guarantees — would be achieved before European parliamentary elections next year.

The insurance industry could “breathe a sigh of relief” because of the 2016 implementation date, said Peter Ott, head of Solvency II at KPMG L.L.P. in London.

Marc Beckers, London-based head of analytics for the Europe, Middle East and Africa region for Aon Benfield, the reinsurance brokerage arm of Aon P.L.C., said regulators and insurers will work together to resolve the outstanding disagreements on Solvency II, particularly the long-term guarantee assessment.

Michaela Koller, director general of Insurance Europe, which represents insurers and reinsurers in Europe, said even with the delay until 2016, the likely tight time between resolving technical questions and implementing the rules would be challenging for insurers and reinsurers and may result in increased costs.

Adding to that cost and complexity is the IAIS plan to develop its own risk-based capital standards.

While developing a global standard would increase comparability of insurers and reinsurers, a lack of detail about how the standard would work alongside other regulatory regimes such as Solvency II is creating uncertainty in the industry, Moody's Investors Service Inc. noted in an outlook.

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Insurance Europe said more information is needed on the IAIS plan. “For example, the main objective of both capital requirements — and how they relate to each other and to other requirements, such as Solvency II — needs to be clarified, as well as to which entities each standard will apply,” Insurance Europe said in a statement.

It is not clear how much Solvency II and the IAIS standards might overlap, said Chris Waterman, managing director and head of Europe, Middle East and Africa insurance at Fitch Ratings Ltd. in London.

This means Solvency II and the IAIS proposals represent “a couple of moving targets” for European insurers and reinsurers, he said.

Part of the reason behind regulatory moves for insurers and reinsurers — and a drive to require them to hold more capital — is the belief that they might be systemically important, said Stuart Shipperlee, analytical partner at London-based Litmus Analysis.

But it is doubtful that the failure of one insurer or reinsurer would widespread economic effects, he said. Yet if capital requirements for reinsurers are increased, this may cause them to increase their rates. In turn, that would prompt insurers to buy less reinsurance and potentially increase the risk that insurers face, he said.

Preparations for Solvency II already have been time-consuming and costly for many insurers, he said. If there are meaningful differences between the IAIS-proposed capital rules and Solvency II, the increased complexity could actually reduce the effectiveness of the regulations, he said.