Featured Product

    EIOPA Recommends Dividend Distributions Within Thresholds of Prudency

    December 18, 2020

    EIOPA published a report that examines the financial stability risks in the European insurance and pension sector. Results of EIOPA's qualitative survey among national competent authorities suggest that both international and country-specific macroeconomic conditions pose significant concerns, with corporate bond downgrades being identified as a key risk for the insurance sector. Additionally, given the latest macroeconomic developments and ongoing uncertainties, an increase in liquidity risk cannot be ruled out looking ahead. Based on its risk assessment, EIOPA recommends to insurers that any dividend distributions should not exceed thresholds of prudency.

    The EIOPA report highlights that, apart from the prolonged period of ultra-low rates, credit risk, equity, and property risk are also relevant for the sectors. The low profitability of investments as well as insurers’ underwriting profitability driven by low premium growth pose potential concerns. However, EIOPA notes that European insurers have been able to withstand the dramatic situation as, in particular, the Solvency II regime helped them to better align capital to risk, build-up resilience, and enhance their risk management practices. While risks surrounding the economic growth outlook remain high, they appear to have become less pronounced and there are the first signs that the near-term impact on insurers’ financial position could be captured within the Solvency II confidence levels. Nonetheless, uncertainty remains high and it is key that insurers act to preserve their capital positions in balance with the protection of policyholders and beneficiaries.

    Therefore, EIOPA strongly recommends insurers to maintain extreme caution and prudence within their capital management. Any dividend distributions, share buy-backs, or variable remunerations should not exceed thresholds of prudency and institutions should ensure that the resulting reduction in the quantity or quality of their own funds remains at levels appropriate to the current levels of risk. Supervisory authorities should ensure that insurers' assessment of the overall solvency needs is forward-looking while accounting for the current level of uncertainty on the depth, magnitude, and duration of the impact of COVID-19 in financial markets and for the repercussions of that uncertainty in their business models and solvency, liquidity, and financial position.

     

    Related Links

    Keywords: Europe, EU, Insurance, Solvency II, Financial Stability Report, COVID-19, Solvency Capital Requirement, Liquidity Risk, Corporate Bonds, 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