EIOPA Paper on Systemic Risk and Macro-Prudential Policy for Insurers
EIOPA published a discussion paper on systemic risk and macro-prudential policy in insurance and comments are requested by April 30, 2019. This is the fourth paper that is part of a series focused on identifying additional macro-prudential tools or measures. The paper focuses on the four tools and measures that have been specifically highlighted in the recent EC Call for Advice to EIOPA.
The paper puts together and summarizes the main findings of the work done by EIOPA, by linking sources of systemic risk and operational objectives, tools already available in the Solvency II framework, and other potential tools and measures to be further considered. The discussion paper primarily focuses on the “principles” and rationale for each tool, though the paper does not comprehensively address the operational aspects/challenges of each tool. In addition to the existing Solvency II tools with direct impact, the other potential tools and measures for further consideration include leverage ratio, capital surcharge for systemic risk, enhancement of the own risk and solvency assessment (ORSA), request of recovery plans, request of resolution plans, enhancement of the prudent person principle, liquidity risk ratios, additional reporting on liquidity, concentration thresholds, and enhanced monitoring against market-wide under-reserving. Similar to the approach followed with other legislative initiatives, the technical details could be addressed by means of technical standards, guidelines, or recommendations, once the relevant legal instrument has been enacted.
This work should now be turned into a specific policy proposal for additional macro-prudential tools or measures, where relevant and possible, as part of the Solvency II review. In the context of this series, EIOPA has followed a step-by-step approach, seeking to address the following questions:
- In the first paper in the series, which was published in 2017, EIOPA identified and analyzed the sources of systemic risk in insurance and proposed a specific macro-prudential framework for the sector.
- In the second paper, EIOPA identified, classified, and provided a preliminary assessment of the existing tools or measures in Solvency II framework to mitigate the previously identified systemic risk sources.
- The third paper assessed other potential tools or measures to be included in a macro-prudential framework for insurers. EIOPA focused on four categories of tools—namely, capital and reserving-based tools, liquidity-based tools, exposure-based tools, and preemptive planning.
Related Links
- Press Release
- Discussion Paper: Systemic Risk and Macro-prudential Policy (PDF)
- Third Paper: Enhancing Macro-Prudential Framework (PDF)
- Second Paper: Solvency II Tools with Macro-Prudential Impact (PDF)
- First Paper: Systemic Risk and Macro-Prudential Policy (PDF)
- EC Call for Advice (PDF)
Comment Due Date: April 30, 2019
Keywords: Europe, EU, Insurance, Systemic Risk, Solvency II, Macro-Prudential Policy, EIOPA
Featured Experts
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Paul McCarney
Insurance product strategist; insurance domain expert; extensive experience developing risk assessment frameworks for insurers
Brian Robinson
Actuary; risk management specialist; corporate and capital modelling expert
Previous Article
FED Publishes Additional Information on Stress Testing ProgramRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
