Featured Product

    EIOPA Publishes Opinion on Supervision of Remuneration Principles

    April 07, 2020

    EIOPA published an opinion on the supervision of remuneration principles in the insurance and reinsurance sectors in EU. The opinion addresses how to ensure consistent practices in application of the remuneration principles included in Solvency II and offers guidance to national supervisory authorities on how to challenge the application of certain principles. EIOPA also published a feedback statement on the comments received on the opinion. EIOPA will start monitoring the application of this opinion by the supervisory authorities two years after its publication. Supervisory authorities should collect qualitative and quantitative data, enabling them to perform supervisory review of the remuneration principles in accordance with this opinion. Instruments for data collection might be either the regular supervisory reporting or a specific request.

    EIOPA delivered this opinion on the basis of Solvency II Directive and the Commission Delegated Regulation in line with the relevant provisions of Directive 2017/828/EC on remuneration. While the Solvency II framework provides for provisions of remuneration for sound and prudent management, the remuneration principles defined in the Delegated Regulation are high-level and leave considerable discretion to undertakings and supervisory authorities. To promote a proportionate approach, the opinion focuses on the staff members identified as potential higher profile risk-takers, including those whose annual variable remuneration exceeds EUR 50,000 and represents more than one-third of the total annual remuneration. These include administrative, management, and supervisory body members, other executive directors who effectively run the undertaking, key function holders as defined in the EIOPA Guidelines on System of Governance, and categories of staff whose professional activities have a material impact on the undertakings' risk profile. Among others, the opinion states the following:

    • Where remuneration schemes have fixed and variable components, these components should be in such a proportion that the employees do not become overly dependent on the variable components.
    • When assessing the adequacy of the deferral period with regard to the nature of the undertakings’ business, its risks, and the activities of the employees in question, supervisory authorities should keep in mind that undertakings have different deferral periods depending on the risks they enter into and that deferral period may or may not vary depending on the categories of staff.
    • Where variable remuneration is performance-related, the total amount of variable remuneration has to be based on a combination of the assessment of the individual’s performance, the performance of the business unit concerned, and the overall result of the undertaking or group to which the undertaking belongs.
    • Financial and non-financial criteria should be appropriately balanced. For instance, where the criteria is 80% financial and 20% non-financial, supervisory authorities may come to the conclusion that the assessment framework is not appropriately balanced.
    • For the supervisory dialog with undertakings, supervisory authorities should consider, as part of the term downward adjustment, all kind of adjustments—for example, malus clawback and in-year adjustments.
    • The supervisory assessment of the undertakings’ remuneration policies should cover the policy for the possible use of termination payments, which should contain guidance of the maximum payment or the criteria for determining the amount of the payment.

    For members of the administrative, management, and supervisory body and the most highly paid employees of global systemically important undertakings, besides the guidance provided in this opinion, supervisory authorities should take into account the FSB Principles and Standards for sound compensation practices if these principles and standards apply in the respective jurisdiction. The benchmarks or thresholds included in this opinion should be considered for supervisory dialog and not as hard targets for the practical implementation of the remuneration principles. These indicative benchmarks or thresholds do not in any way restrict the supervisory authorities from having stricter practices—that is, lower benchmarks or thresholds—to trigger a supervisory dialog with undertakings if it is deemed appropriate based on a risk-based approach. In this context, supervisory authorities may also adopt a proportionate and more flexible approach in the supervision of the remuneration principles when undertakings are categorized as low risk, including the design of the remuneration policy.

     

    Related Links

    Keywords: Europe, EU, Insurance, Solvency II, Remuneration Principles, Reporting, FSB, EIOPA

    Featured Experts
    Related Articles
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    News

    EU to Amend Credit Risk Adjustment Rules; ESAs Submit Queries on SFDR

    The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    May 13, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.

    May 12, 2022 WebPage Regulatory News
    News

    MAS Amends Notice 635 and Issues Second Proposal on Green Taxonomy

    The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.

    May 12, 2022 WebPage Regulatory News
    News

    EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA

    The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.

    May 11, 2022 WebPage Regulatory News
    News

    EC Mandates ESAs to Propose Amendments to SFDR Technical Standards

    The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.

    May 11, 2022 WebPage Regulatory News
    News

    EBA Examines Supervisory Practices, Issues Deposits Reporting Template

    The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),

    May 11, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8196