Featured Product

    EIOPA Publishes Statement on Adverse Interest Rate Environment

    February 20, 2020

    EIOPA published a supervisory statement on the impact of the ultra-low or negative interest rate environment on the insurance sector in EU. The statement starts by analyzing the impact of ultra-low or negative yields on the European insurance sector, provides an overview of the supervisory responses and the reactions of undertakings to such an environment, and provides a set of recommendations to mitigate the impact of the ultra-low or negative interest rate environment. This statement should be read along with the background note of EIOPA, which focuses on the supervisory powers and measures and the reactions of companies to the low interest rate environment.

    The statement highlights that the ultra-low or negative interest rate environment constitutes one of the most important sources of systemic risk for insurers for the coming years. Such an environment has an impact on both asset and liability sides of the balance sheet, affecting the solvency position and profitability of undertakings. The aim of the supervisory statement is to raise awareness and ensure that the insurance sector continues to be financially resilient. The statement also seeks to inform consumers and policyholders about supervisory measures and actions being taken to protect their interest. EIOPA encourages the national supervisory authorities and the undertakings in EU to continue taking actions to mitigate the impact of the ultra-low or negative interest rate environment on the EU insurance sector.

    EIOPA recommends that, in the medium-to-long-term, the national supervisory authorities should identify whether there are any tools or powers missing in their current toolkit. Where a gap is identified, the national authorities should request the missing powers. In the short-term, however, EIOPA recommends that:

    • National supervisory authorities should intensify the monitoring and supervision of insurers identified as facing greater exposure to the low interest rate environment;
    • National supervisory authorities should engage in dialog with undertakings to explore actions they could take to improve their financial resilience
    • Within the context of improving financial resilience and in particular sound capital planning, undertakings should exercise caution in distributing dividends and national supervisory authorities should consider whether it is necessary to restrict the distribution of dividends;
    • National supervisory authorities and undertakings should pay special attention on preemptive recovery and resolution planning to reduce the likelihood and impact of insurance failures 
    • National supervisory authorities should broaden the analysis of the low interest rate environment and also consider the potential build-up of systemic risk.

    The content of this document is aligned and should be read in conjunction with the policy proposals contained in the Consultation Paper on the Opinion on the 2020 Review of Solvency II. 

     

    Related Links

    Keywords: Europe, EU, Insurance, Interest Rate Risk, Systemic Risk, Solvency II, Recovery and Resolution Planning, Asset and Liability Management, ALM, EIOPA

    Featured Experts
    Related Articles
    News

    EBA Analyzes Impact of Unwind Mechanism of Liquidity Coverage Ratio

    EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.

    November 19, 2020 WebPage Regulatory News
    News

    ECB Outlines Views on Possible Changes to AnaCredit Rule and TLTROs

    In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.

    November 19, 2020 WebPage Regulatory News
    News

    IASB Begins First Phase of Post-Implementation Review of IFRS 9

    IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Report Examines Progress in Resolvability of Systemic Institutions

    FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.

    November 18, 2020 WebPage Regulatory News
    News

    EBA Benchmarks National Insolvency Frameworks Across EU

    EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Reports Assess Impact of Pandemic on Financial Stability

    FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.

    November 17, 2020 WebPage Regulatory News
    News

    RBNZ Consults on Implementation of Capital Review Changes

    RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.

    November 17, 2020 WebPage Regulatory News
    News

    IASB Announces Andreas Barckow as the New Chair from July 2021

    The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.

    November 17, 2020 WebPage Regulatory News
    News

    HKMA Consults on Capital Rules for Bank Equity Investments in Funds

    HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.

    November 17, 2020 WebPage Regulatory News
    News

    ESRB Supports Extension of Macro-Prudential Measure by Swedish FSA

    ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).

    November 17, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6153