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

    ECB Amends Guideline on Temporary Collateral Easing Measures

    ECB published Guideline 2021/975, which amends Guideline ECB/2014/31, on the additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral.

    June 17, 2021 WebPage Regulatory News
    News

    EIOPA Releases Report on Artificial Intelligence Governance Principles

    EIOPA published a report, from the Consultative Expert Group on Digital Ethics, that sets out artificial intelligence governance principles for an ethical and trustworthy artificial intelligence in the insurance sector in EU.

    June 17, 2021 WebPage Regulatory News
    News

    HKMA to Increase Focus on Suptech and Regtech Cloud Adoption

    HKMA published the seventh and final issue of the Regtech Watch series, which outlines the three-year roadmap of HKMA to integrate supervisory technology, or suptech, into its processes.

    June 17, 2021 WebPage Regulatory News
    News

    EC Consults on Improving Transparency in Secondary Markets for NPLs

    EC launched a targeted consultation to improve transparency and efficiency in the secondary markets for nonperforming loans (NPLs).

    June 16, 2021 WebPage Regulatory News
    News

    BIS and Nordic Central Banks Launch Innovation Hub in Stockholm

    BIS, Danmarks Nationalbank, Central Bank of Iceland, Norges Bank, and Sveriges Riksbank launched an Innovation Hub in Stockholm, making this the fifth BIS Innovation Hub Center to be opened in the past two years.

    June 16, 2021 WebPage Regulatory News
    News

    FDIC Tech Sprint Aims to Explore Technologies to Reach Unbanked

    FDITECH, the technology lab of FDIC, announced a tech sprint that is designed to explore new technologies and techniques that would help expand the capabilities of community banks to meet the needs of unbanked individuals and households.

    June 16, 2021 WebPage Regulatory News
    News

    EC Releases Sustainable Finance Taxonomy Compass

    EC released the EU Taxonomy Compass, which visually represents the contents of the EU Taxonomy starting with the EU Taxonomy Climate Delegated Act.

    June 16, 2021 WebPage Regulatory News
    News

    FDIC Proposes Amendments to Real Estate Lending Standards

    FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.

    June 15, 2021 WebPage Regulatory News
    News

    EIOPA to Consider Liquidity Risk in Stress Test for 2021

    EIOPA published its annual report, which sets out the work done in 2020 and indicates the planned work areas for the coming months.

    June 15, 2021 WebPage Regulatory News
    News

    ESRB Paper Discusses Measurement of Impact of Bank Failure via Lending

    The ESRB paper that presents an analytical framework that assesses and quantifies the potential impact of a bank failure on the real economy through the lending function.

    June 15, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7116