The European Insurance and Occupational Pensions Authority (EIOPA) published the annual report detailing its prudential and conduct supervision activities and achievements in 2020. The supervisory activities in 2020 covered a variety of areas, including Solvency II issues such as calculation of technical provisions and reporting templates, development of supervisory activities in the area of conduct risk, and the analysis of innovative technologies. In 2021, EIOPA plans to complete certain priorities stemming from the previous plans, while continuing to monitor and mitigate the impact of COVID-19 crisis.
EIOPA will focus its supervisory work on activities set out in the supervisory convergence plan for 2021. The key highlights mentioned in the report include the following:
- EIOPA launched a new thematic review on mortgage life and other credit protection insurance sold through banks. The thematic review will be completed in 2021, after re-prioritization due to the pandemic.
- To address the existing data gap, EIOPA expects to include a new template on cyber underwriting in the 2021 amendment to the implementing technical standards on reporting and aims to regularly collect data on cyber coverage.
- EIOPA is reviewing supervisory and academic approaches to cyber risk measurement and stress testing and evaluating the potential for the development of a methodological approach to stress testing or assessing the sensitivity of insurers to cyber risk, from an operational and underwriting risk perspective.
- EIOPA launched, in 2020, a new comparative study on modeling of diversification benefits with the aim to analyze and compare the levels of diversification; to facilitate a better understanding of modeling dependencies, aggregation, and resulting diversification benefits, and to enhance the quality and convergence of supervision on diversification in internal models. Results from the diversification study are expected in the second quarter 2022.
- EIOPA has identified additional divergent practices that will be addressed from a supervisory convergence point of view. This covers the use of economic scenario generators, modeling of policyholder behavior, future management actions, expenses assumptions, expert judgment, Expected Profits Included in Future Premiums, and contract boundaries. To foster convergence, EIOPA intends to provide further technical guidance on all these topics through the revision of the guidelines on contract boundaries and the guidelines on the valuation of technical provisions to be publicly consulted in 2021.
- EIOPA has adopted a new governance structure for peer reviews in 2020 and approved the work plan of peer review for the period 2020-2022.
- EIOPA continued to discuss some supervisory issues and challenges experienced by some national competent authorities in the supervision of run-off undertakings or portfolios. The issues addressed are various and range from authorization of the acquisition of a run-off insurance undertaking or transfer of portfolio to the ongoing supervision of technical provisions, investments, and reinsurance. In this context, a supervisory statement is expected to be published in 2021.
- By the end of 2020, six cooperation platforms were operational with the involvement of 21 national competent authorities. For some of the platforms the intensive cooperation is continuing into 2021. EIOPA was also involved with three additional platforms that were largely dormant in 2020 with the home supervisors Ireland, Romania, and Bulgaria.
Keywords: Europe, EU, Insurance, Reinsurance, Supervisory Activities, COVID-19, Solvency II, Technical Provisions, Reporting, Stress Testing Cyber Risk, Supervisory Convergence, Cyber Underwriting, EIOPA
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