EIOPA published a statement outlining actions toward mitigating the impact of COVID-19 on the insurance sector in EU. EIOPA emphasized that insurance companies should be ready to implement the necessary measures to ensure business continuity and the national competent authorities should be flexible regarding the timing of supervisory reporting and public disclosure for the end of 2019. EIOPA plans to coordinate the specifics of the approach with the competent authorities. In the short term, EIOPA will limit its requests of information and the consultations to the industry to essential elements needed to assess and monitor the impact of the current situation in the market. EIOPA is also extending the deadline of the Holistic Impact Assessment for the 2020 Solvency II Review by two months, to June 01, 2020.
In the coming days, EIOPA will communicate details on postponing additional reporting and information requirements. Furthermore, the Solvency II framework includes a number of tools that can be used to mitigate risks and impact to the sector. EIOPA and the national competent authorities stand ready to implement these tools, if and when necessary, in a coordinated manner, to ensure that policyholders remain protected and financial stability is safeguarded. Nevertheless, insurance companies should take measures to preserve their capital position in balance with the protection of the insured, following prudent dividend and other distribution policies, including variable remuneration. Notwithstanding existing tools and powers, and together with national authorities and the other ESAs and ESRB, EIOPA will continue to monitor the situation and will take or propose to EU institutions any measure necessary to mitigate the impact of market volatility to the stability of the insurance sector in Europe and safeguard the protection of policyholders.
Under Solvency II, EU insurance companies are required to hold sufficient eligible own funds on an ongoing basis to cover their Solvency Capital Requirement. The risk-based Solvency Capital Requirement enables insurance undertakings to absorb significant losses and give confidence to policyholders and beneficiaries that payments will be made as they fall due. Furthermore, the Solvency II framework includes a ladder of supervisory intervention between the Solvency Capital Requirement and the Minimum Capital Requirement, which is the minimum level of security below which a company’s financial resources should not fall. This allows for flexibility in cases of extreme situations, including measures to extend the recovery period of affected insurers, for example, as foreseen by Article 138 of the Solvency II Directive. Moreover, recent stress tests have shown that the sector is well capitalized and able to withhold severe but plausible shocks to the system. Nevertheless, insurance companies should take measures to preserve their capital position in balance with the protection of the insured, following prudent dividend and other distribution policies, including variable remuneration.
Related Link: Statement
Keywords: Europe, EU, Insurance, COVID-19, Solvency II, Business Continuity, SCR, Stress Testing, Operational Risk, EIOPA
BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.
In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.