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    EIOPA Issues Taxonomy for Solvency II Reporting, Issues Other Updates

    July 16, 2022

    The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.7.0 of the Solvency II data point model (DPM) and XBRL taxonomy. Additionally, EIOPA revised guidelines on contract boundaries, launched consultation on the draft supervisory statement on differential pricing practices, and published a thematic article on the effects of stress test on the dividend policies of insurers.

    Below are the key highlights of the recent updates:

    • The EIOPA Solvency II DPM and XBRL taxonomy package version 2.7.0 contains release notes, DPM documentation, DPM dictionary, Solvency II annotated templates, detailed change logs from earlier versions, list of validations, Solvency II XBRL taxonomy, and XBRL taxonomy documentation and filing rules. The taxonomy package release 2.7.0 is provided to be used from the December 31, 2022 reference date until a new version is announced. The final XBRL taxonomy release 2.8.0 without validations (that is templates and instructions will be final) will be published on July 29, 2022. The final release of version 2.8.0 with validations and modeling will be published in January 2023 (hotfix is expected in March 2023).
    • EIOPA published the revised guidelines on contract boundaries. The revision introduces new guidelines and amends the current guidelines on topics that are relevant for the determination of contract boundaries, in particular regarding the assessment whether a cover or financial guarantee has a discernible effect on the economics of the contract and the identification of the contracts which can be unbundled. The revised guidelines shall apply from January 01, 2023.
    • EIOPA is consulting on a draft supervisory statement on differential pricing practices. The statement reflects on “price walking,” which refers to the practice of increasing premiums at the renewal stage based on the analysis of characteristics specific to a particular consumer to predict behaviors not related to risk or cost of services. Price walking practices in particular can have a detrimental effect on the policyholders that are unlikely to switch providers. The practice unfairly penalizes loyal customers and can disproportionately affect vulnerable groups such as the elderly. EIOPA, therefore, sets out in its supervisory expectations that insurers wishing to make use of differential pricing practices must demonstrate that they have adequate product oversight and governance measures in place to ensure the fair treatment of consumers and the mitigation of consumer risks. EIOPA is requesting feedback until October 07, 2022
    • EIOPA published a thematic article that investigates whether stress test results and other characteristics associated with the vulnerabilities of the European insurers affect dividend distributions and share buybacks. The authors focus on the EU-wide insurance stress test conducted in 2018 and 2021 to also capture the behavior of insurers during the COVID-19 crisis. Empirical results suggest that the two stress tests considered had no significant impact on changes in dividend distributions. However, more resilient insurers measured by assets-over-liabilities ratio seem to have higher dividend payout ratios including share buybacks. On the contrary, higher generated profit tend to be reflected in lower payout ratio.

     

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    Keywords: Europe, EU, Insurance, Reinsurance, Solvency II, Reporting, DPM, XBRL Taxonomy, Taxonomy, Contract Boundaries, Governance, Stress Testing, Dividend Distribution, EIOPA

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