EIOPA published the supervisory convergence plan for 2021. This plan provides, starting with the priorities identified in 2020, an update of EIOPA priorities for 2021 regarding the supervisory convergence practices focusing on the projects leading to concrete deliverables not in place yet. During the year, EIOPA will continue to work on common benchmarks for supervision of internal models, application of proportionality in Solvency II, implementing the goals set in its cyber underwriting strategy, measures for integrating the environmental, social, and governance (ESG) risks into prudential supervision, and fulfilment of its suptech strategy.
The following are the key highlights of the work priorities for this year:
- Proportionality. Following up on the advice on 2020 review of Solvency II, EIOPA intends to continue working to prepare the support of the future proportionality framework by further developing regulatory work in the form of the future EIOPA Guidelines that will include operational guidance for the application of the new framework on proportionality. EIOPA will also develop preparatory work for the future development of a regular report on the implementation of proportionality in Solvency II.
- Internal Model Benchmarking. With respect to the common benchmarks for supervision of internal models, EIOPA will work on further development of the prototype dashboard (Internal Model On-Going Appropriateness Indicators), to address potential drawbacks and weaknesses allowing it to be used by national competent authorities for supervision.
- Internal Model Outcomes. EIOPA will perform comparative studies on the outcomes of internal models regarding underwriting risks for main non-life lines of business (NLCS) and market and credit risk (MCRCS), with an analysis of potential model drifts over time. It will also continue working on the study on modeling of diversification benefits in internal models (results are expected in 2022).
- Reporting. With respect to the reporting requirements for internal models, it will contribute to the amendment to the implementing technical standards on reporting to ensure convergence in the interpretation of the new requirements. It will also work to further improve the reporting requirements for groups in the 2021 amendment to the implementing technical standards on reporting.
- Integration of ESG Risks. EIOPA will be taking step-by-step measures for integrating the assessment and management of ESG risks into prudential and conduct supervision through prudential oversight of climate-change-related transition and physical risks on insurers’ balance sheets; it will also do this via an oversight of the ESG governance and risk management framework of insurers.
- Supervisory Convergence Post Solvency II Review. Post the Solvency II 2020 Review, EIOPA will continue developing supervisory convergence tools with regard to the areas already identified in the plan for 2020. One area involves good practices on the treatment of own funds of the related undertakings that fall under the category of other financial sectors and for which sectorial rules apply, along with the interconnection with the Financial Conglomerates Directive and Regulations. Other areas concern good practices on the supervision of intra-group transactions (IGT) and risk concentrations and good supervisory practices on the application of combination of methods in the calculation of the Group Solvency.
- Outsourcing and Cyber Risk. EIOPA will conduct a peer review in the area of outsourcing by insurance or reinsurance undertakings. It will also further improve the reporting requirements for cyber risks in the 2021 amendment to implementing technical standards on reporting and consider the impact from Digital Operational Resilience Act (DORA).
- Suptech. Following the publication of EIOPA’s suptech strategy in February 2020, EIOPA developed a program which includes some projects impacting supervisory convergence. As part of this, it will monitor the appropriateness of the code-sharing platform to be presented in early 2021 for the ongoing exchange of knowledge and experience on suptech tools implemented by national authorities to promote a culture of innovation and initiative between supervisors. By the end of 2021, EIOPA will assess whether the use of a more sophisticated tool for the information-sharing would be needed. Additionally, in 2021, EIOPA will carry out at least one pilot on how to use supervisory technology to identify and possibly predict conduct risks.
Keywords: Europe, EU, Insurance, Solvency II, Supervisory Convergence, Suptech, ESG, Cyber Risk, Proportionality, Internal Models, Outsourcing, Reporting, EIOPA
Previous ArticleEC Amends Rules on Clearing Obligation for OTC Derivative Contracts
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)