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July 31, 2018

EIOPA published a paper that identifies, classifies, and provides a preliminary assessment of the potential additional tools and measures to enhance the macro-prudential framework for insurers in EU. This is the third paper in a series on systemic risk and macro-prudential policy in the insurance sector.

This third paper in the series builds on, and supplements, the previous ones by performing an initial assessment of additional potential tools or measures to be included in a macro-prudential framework designed for insurers. The aim of this exercise is to mitigate the sources of systemic risk and contribute to the achievement of the operational objectives. EIOPA conducted an analysis focusing on the four categories of tools: capital and reserving-based tools, liquidity-based tools, exposure-based tools, and preemptive planning. The paper describes the potential instruments or measures that have been identified for each category and offers preliminary analysis for each tool. It examines the way in which the tools in each category contribute to achieving one or more of the operational objectives identified in previous papers and offers preliminary conclusions. The paper focuses on whether a specific instrument should or should not be further considered. This is an important aspect in light of the future work in the context of the Solvency II review. The initial assessment should be understood as a first step of the process and not yet as a formal proposal. 

The first paper in this series was published in 2017 and it identified and analyzed the sources of systemic risk in insurance. The second paper was published in March 2018 and it identified, classified, and provided a preliminary assessment of the already existing tools or measures in the Solvency II framework that could mitigate any of the previously identified systemic risk sources. Through this paper series, EIOPA intends to ensure that any further extension of the debate on systemic risk and macro-prudential policy to the insurance sector fully reflects the specific nature of the industry.

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Keywords: Europe, EU, Insurance, Systemic Risk, Macro-prudential Framework, Solvency II, EIOPA

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