EIOPA Seeks Views on Pillar 1 Treatment of Climate Measures in SII
The European Insurance and Occupational Pensions Authority (EIOPA) is seeking comments, until June 01, 2022, on the data collection on prudential treatment of climate-related adaptation measures in non-life insurance. EIOPA published an opinion on individual disclosures in the context of EU-wide stress test exercises as well as issued supervisory statement on supervision of run-off undertakings. Also published was the technical information on relevant risk-free interest rate term structures for Solvency II with reference to the end of March 2022.
Below are the key highlights of the aforementioned publications:
- The consultation on a data collection exercise for climate risk measures seeks to assess the potential for a dedicated Pillar 1 treatment of climate-related adaptation measures in Solvency II’s standard formula for non-life underwriting risk. The focus of the data collection lies on the influence of climate-related adaptation measures on premium risk and the consultation is supplemented by qualitative questions on reserve risk and natural catastrophe risk. Insurance and reinsurance undertakings participating in the data collection should submit results to their national competent authorities by June 01, 2022. After validating the submissions, the national competent will report this information to EIOPA by June 10, 2022. EIOPA plans to disclose results from the data collection as part of an upcoming report on the prudential treatment of sustainability-related factors in Solvency II.
- Over the past years, EIOPA has emphasized on disclosure of individual stress test results to further improve transparency, enhance market discipline, increase participants’ commitment, and contribute to a level playing field among insurers and across the financial sector. Despite the steps taken by EIOPA to address the industry’s concerns regarding individual disclosures, such as by requesting only a subset of balance sheet indicators to be published, the majority of (re)insurers continue to show reluctance. Therefore, EIOPA proposed amendments to the existing legal framework of Solvency II Directive (2009/138/EC) that will require each participating financial institution to disclose the individual stress test results to EIOPA. In addition, the proposed amendments in EIOPA Regulation will give EIOPA the authority to carry out Union-wide stress tests and disclose the results for each participating financial institution. EIOPA invites the European Parliament, the Council, and the Commission to take these proposed amendments into consideration in light of the ongoing Solvency II review.
- The statement on supervision of run-off undertakings is intended to ensure that a high-quality and convergent supervision is applied to run-off undertakings and portfolios while considering their specific nature and risks, the principle of proportionality, and the prudent-person principle. The supervisory statement sets out supervisory expectations for the supervision of run-off undertakings in the context of portfolio transfers, acquisitions of qualifying holdings and mergers (ownership changes) as well as on-going supervision. The supervisory statement addresses risks related to full, partial and specialized run-off undertakings. With respect to the acquisition of run-off (re)insurance undertakings or portfolios. EIOPA noted that the business acquired shall be kept profitable and apply prudent assumptions relating to technical provisions and capital requirements calculation and should not have any impact on the insurance service and on the protection of policyholders. The supervisory statement is accompanied by resolution of comments from the public consultation, the feedback statement to stakeholders, and the impact assessment developed based on the input provided during the consultation period.
Related Links
- Consultation on Climate Data Collection
- Technical Specifications for Data Collection (PDF)
- Press Release on Stress Test Disclosures
- Opinion on Individual Disclosures of Stress Tests (PDF)
- Press Release on Supervisory Statement
- Supervisory Statement and Other Documents
Keywords: Europe, EU, Insurance, Solvency II, Climate Change Risk, ESG, Reporting, Stress Testing, Disclosures, Supervisory Statement, Run-off Undertakings, Risk-free Rates, EIOPA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Adam Koursaris
Asset and liability management expert; capable modeler; risk and capital specialist
Next Article
MAS and Australia to Cooperate on FintechRelated Articles
EBA Sets Out Roadmap for 2023, Updates Reporting Framework 3.2
The European Banking Authority (EBA) published its work program for 2023 as well as the technical package for phase 3 of version 3.2 of its reporting framework.
FED Announces Launch of Climate Scenario Analysis Exercise in 2023
The Board of Governors of the Federal Reserve System (FED) announced a pilot climate scenario analysis exercise for six largest banks in the U.S.
BIS Paper Studies Impact of Fintech Lending on Small Businesses in US
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
EBA Launches EU-Wide Transparency Exercise in 2022
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
EC Rule Lists Advanced Economies for Market Risk Capital Calculations
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
