* Solvency II start in 2016 difficult but possible -EIOPA
* EIOPA head says heard encouraging signals on negotiations
* Says sees Europe-wide use of early warning indicators
By Jonathan Gould
FRANKFURT, Sept 6 (Reuters) - New risk capital rules forEurope's insurance sector could still take effect in 2016,although the timetable for getting them finalised is tight, thehead of the EU insurance supervisor EIOPA said on Friday.
Gabriel Bernardino also said the British PrudentialRegulation Authority's plans to use "early warning indicators",to check the accuracy of the complex mathematical models thatinsurance companies use to monitor their risks and capital,would be rolled out across Europe.
The indicators would form an integral part of the new riskrules, known as Solvency II, which have been delayed bydisagreement between the European Parliament, the EU Commissionand EU member states over their final form.
A 2016 start for Solvency II was "difficult but possible,"said Bernardino, who is chairman of the European Insurance andOccupational Pensions Authority (EIOPA).
Efforts to finalise the rules had run into trouble last yearparticularly over the treatment of certain long-term lifeinsurance savings policies but EU talks to resolve the problemsare due to start again next week.
"I am hearing encouraging signals that things are in theright direction," Bernardino told a press briefing.
Big insurers like Allianz, Axa andGenerali are thought to be well prepared for therules, which require insurers to introduce more sophisticatedmanagerial and technical systems for measuring and managing therisks on their books.
Larger insurers expect to use complex, tailor-mademathematical models to demonstrate those risks in dealing withregulators, which they hope will give them an advantage.
The UK's Prudential Regulation Authority (PRA), whichregulates banks as well as insurers like Prudential Plc. and Legal & General, has said it wants to avoid relyingtoo much on capital models and plans to introduce "early warningindicators" as an extra safeguard.
Bernardino said the use of early warning indicators wasencompassed within Solvency II and should be rolled outEurope-wide, rather than used on a company or country basis.
"It is not a question of believing or not believing inmodels," he said, adding that early warning indicators wouldhelp supervisors ask the right questions about companies' risks.
"We are in close cooperation with the UK PRA right now. Weknow they are doing a pilot exercise," Bernardino said.
"At some point in time we will come out with some indicatorsto be used on a European level," he said, adding that theindicators would give supervisors a tool to challenge companieson the behaviour of variables in their models and thedevelopment of the models themselves.