EIOPA published the findings of a peer review on the Regular Supervisory Report. The peer review examined how and, to what extent, the proportionate approach set out under the Delegated Regulation 2015/35, which supplements Solvency II Directive, has been implemented among national competent authorities. EIOPA suggested a number of recommended actions that the national competent authorities should take to bring about greater convergence in their approaches and a more consistent implementation of the principle of proportionality. National competent authorities are expected to have implemented the recommended actions targeting supervisory shortcomings by 2022.
In the peer review, EIOPA analyzed the legal and regulatory frameworks, along with the national supervisory practices, across 31 national competent authorities. The reference period for the peer review was from the entry into force of Solvency II to the end of March 2019. Given that the reference period for this peer review concluded before January 31, 2020, the UK PRA also participated in full and its results are included in the report. EIOPA issued 51 recommended actions, addressed to national competent authorities in 26 countries. A full list of the recommended actions and countries to which they have been issued can be found in Annex IV of the report on findings of peer review. The recommended actions can be grouped into four categories:
- Proportionality—EIOPA issued 36 recommended actions in the area of proportionality. Most of the recommended actions in this area relate to achieving a more appropriate implementation of the principle of proportionality by requiring submission of the Regular Supervisory Report more frequently than the minimum of every three years. These recommended actions involve either a change to the local legislation or the adoption of an internal policy to accelerate the process of introducing different frequencies of submission of the full Regular Supervisory Report. Some of these recommended actions relate to the use of a risk-based approach when deciding on the different frequencies of submission of the Regular Supervisory Report, in particular when there is a lack of any IT or risk assessment system underpinning decision-making.
- Communication of material changes—EIOPA issued nine recommended actions in this area. To enhance the effectiveness of supervision, recommended actions have been issued to all of the national competent authorities that do not require undertakings to submit a formal notification of "no material change" to ensure that in future they do so.
- Communication of the decision—Three recommended actions have been issued in this category. The recommended actions have been issued to national competent authorities that are group supervisors and that do not collect information on and do not communicate the frequency of submission of the Regular Supervisory Report to ensure that in future they do so.
- Country-specific recommended actions—EIOPA has issued four country-specific recommended actions. Some recommended actions were issued to France, Luxembourg, Malta, and Poland to address specificities observed in individual countries’ practices.
EIOPA has concluded, based on the issues observed in several countries in relation to proportionality in setting the frequency of submission of the Regular Supervisory Report, that the Solvency II legislation needs to be further clarified. As a result of the findings of the peer review, EIOPA will take the following actions:
- Introduce supervisory guidance by keeping the minimum requirement for submission of the full Regular Supervisory Report as once every three years but requiring a mandatory assessment by national competent authorities and communication of the frequency of the Regular Supervisory Report.
- Include in its guidelines or supervisory handbook guidance on issuing exemptions from annual or biennial submission of the full Regular Supervisory Report based on a list of events that are specific to the undertaking (e.g. mergers/acquisitions).
- Develop further guidance in relation to the communication to the group supervisor and college in the context of Guideline 23, paragraph 1.58, of the EIOPA guidelines on supervisory review process, by either updating this guideline or including this aspect in the supervisory handbook.
Keywords: Europe, EU, Insurance, Solvency II, Regular Supervisory Report, Peer Review, Proportionality, Supervisory Practices, EIOPA
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