EIOPA Issues Paper on Solvency II Tools with Macro-Prudential Impact
EIOPA published a paper on Solvency II tools with macro-prudential impact. This is the second paper in a series on systemic risk and macro-prudential policy in the insurance sector. The paper identifies, classifies, and provides a preliminary assessment of the tools or measures in the Solvency II framework. It assesses tools or measures that could mitigate the systemic risk sources that were identified in the first paper in the series, which was published in February 2018.
The paper provides an overview of the key elements of Solvency II that may contribute to mitigating systemic risk. The paper identifies the most relevant instruments/measures in Solvency II and then describes the way each tool works, maps the tool against a source of systemic risk, and assesses the impact of the tool, to the extent possible. The paper is focused on the tools with direct macro-prudential impact: the symmetric adjustment in the equity risk module, the volatility adjustment, the matching adjustment, the extension of the recovery period, the transitional measure on technical provisions, and prohibiting or restricting certain types of financial activities. Finally, the paper provides an overview of other measures in case of breach of the Solvency Capital Requirement (SCR), along with a summary of other measures available at the national level. The paper also includes an annex on the macro-prudential impact of the most relevant long-term guarantees measures under stress (that is, volatility adjustment and matching adjustment).
The first paper in this series, which was published in 2017, identified and analyzed the sources of systemic risk in insurance. 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.
Related Links
- Press Release
- Second Paper: Solvency II Tools with Macro-Prudential Impact (PDF)
- First Paper: Systemic Risk and Macro-Prudential Policy (PDF)
Keywords: Europe, EU, Insurance, Systemic Risk, Macro-prudential Policy, Solvency II, EIOPA
Featured Experts

Adam Koursaris
Asset and liability management expert; capable modeler; risk and capital specialist

Cassandra Hannibal
Life insurance actuary; risk management and economic capital specialist

Dr. Samuel W. Malone
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
Previous Article
FED Releases Results of Comprehensive Capital Analysis and ReviewRelated Articles
EC Adopts Financial Reporting Changes Arising from Benchmark Reforms
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HMT Updates List of Post-Brexit Equivalence Decisions in UK
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
EBA Issues Erratum for Technical Package on Reporting Framework 3.0
EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.
APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets
APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.
EBA Publishes Risk Dashboard for Third Quarter of 2020
EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.
ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro
ECB concluded the public consultation on the introduction of a digital euro in EU.
ECB Finalizes Guide on Supervisory Approach to Bank Consolidation
ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.
SRB Chair Outlines Work Priorities for 2021
The SRB Chair Elke König published an article setting out work priorities for 2021.
FDIC Selects Companies to Compete in Final Phase of Tech Sprint
FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.