Featured Product

    EIOPA Publishes Final Advice Resulting from 2020 Solvency II Review

    December 17, 2020

    EIOPA published the opinion on the 2020 review of the Solvency II regime. Overall, EIOPA notes that the Solvency II framework is working well from the prudential perspective and no fundamental changes are needed, rather a number of adjustments are required to ensure that the regulatory framework continues as a well-functioning risk-based regime. The opinion also reflects the need to supplement the current micro-prudential framework with a macro-prudential perspective, including the introduction of specific tools and measures to equip supervisors with sufficient powers to address all sources of systemic risk. EC proposal on the review is expected in the third quarter of 2021.

    The proposed measures aim to keep the regime fit-for-purpose by introducing a balanced update of the regulatory framework, reflecting better the economic situation, and completing the missing elements from the regulatory toolbox; in short, these three areas form the EIOPA approach to Solvency II review. The EIOPA opinion considers the 19 topics covered in the EC call for advice (published in February 2019) to EIOPA on the review of the Solvency II Directive. As included in the opinion, the key proposals from EIOPA include the following:

    • Adjustments to the capital treatment of interest rate risk, reflecting the steep fall of interest rates experienced during the last years and the existence of negative interest rates; recommendation for changes to the interest rate curves used by insurers to value liabilities, specifically in respect of the method of extrapolating risk-free rates to better reflect market reality
    • Improvements to the volatility adjustment to better align the design to its objectives and increase its effectiveness in curbing short-term volatility and rewarding insurers for holding illiquid liabilities
    • Refinements to the calculation of the risk margin of insurance liabilities, recognizing diversification over time, thus reducing its volatility and size, in particular for long-term liabilities
    • Revisions to the criteria for the ability to hold equity long-term, by making a link with long-term illiquid liabilities, with the aim to better reflect risks and further encourage long term investments
    • Clear risk-based quantitative criteria to identify low-risk undertakings eligible for applying proportionality measures, by recommending the introduction of a new process for applying and supervising the principle of proportionality
    • Support for efficient exchange of information among national supervisory authorities during the process of authorization and in case of material changes in cross-border activities
    • Establishment of a minimum harmonized and comprehensive recovery and resolution framework and the introduction of a European network of national Insurance Guarantee Scheme that should meet a minimum set of harmonized features with the primary aim to protect policyholders—paying compensation when needed or ensuring the continuation of insurance policies

    Accompanying the opinion are several documents, including

    • Factsheet providing an overview of the opinion
    • Background document setting out the analysis that the EIOPA technical advice for the 2020 review is based on and an annex to this document covering natural catastrophe (nat cat) policy conditions
    • Impact assessment of individual policy options per topic, for the advice

    EIOPA also published a report on quantitative reporting templates and annexes containing templates and related instructions; this material covers the Individual Quantitative Reporting Templates at solo and group levels, including Financial Stability Reporting. This report aims to provide stakeholders the full view of the future reporting and disclosure requirements, as a complement of the legislative proposals in this area covered by the Opinion. The document contains information on the templates proposed for deletion, templates proposed for simplification, new templates proposed for inclusion, and the revision and inclusion of new risk-based thresholds to provide an understanding of the reporting and disclosure framework envisaged by EIOPA, particularly the application of the proportionality principle in reporting requirements. Based on the proposals included in this document, EIOPA will propose amendments to the implementing technical standards on reporting and disclosure and will revise the EIOPA guidelines on Financial Stability Reporting in accordance with its mandate. 

     

    Related Links

    Keywords: Europe, EU, Insurance, Solvency II, Solvency II Review, ESG, Resolution Framework, Reporting, Proportionality, Macro-Prudential Framework, Disclosures, Opinion, Solvency Capital Requirements, EIOPA

    Featured Experts
    Related Articles
    News

    OSFI Issues Results of Pilot on Climate Risk Scenario Analysis

    The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.

    January 20, 2022 WebPage Regulatory News
    News

    EC Issues Regulation on Adjustments to K-Factor Coefficients Under IFR

    The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).

    January 20, 2022 WebPage Regulatory News
    News

    ECB Issues Opinions on Green Bonds Standard and CRR Proposals

    The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.

    January 19, 2022 WebPage Regulatory News
    News

    ESRB Explores Policy Response to Risks Arising from Digitalization

    The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.

    January 18, 2022 WebPage Regulatory News
    News

    HKMA Consults on FIRO Code, Revises Policy on Foreign Exchange Risk

    The Hong Kong Monetary Authority (HKMA) is consulting on the draft Financial Institutions (Resolution) Ordinance (Cap. 628), or FIRO, Code of Practice chapter on liquidity and funding in resolution, until March 14, 2022.

    January 18, 2022 WebPage Regulatory News
    News

    FI Publishes Multiple Regulatory and Reporting Updates

    The Swedish Financial Supervisory Authority (FI) announced that the capital adequacy reporting as at December 31, 2021 must be done by February 11, 2022.

    January 17, 2022 WebPage Regulatory News
    News

    EU Authorities Address COVID-19 Reporting, MCD, and PSD2 Issues

    The European Banking Authority (EBA) announced that the guidelines on the reporting and disclosure of exposures subject to measures COVID-relief measures shall continue to apply until further notice.

    January 17, 2022 WebPage Regulatory News
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7903