EIOPA published its 2018 supervisory activities report, in accordance with Article 259 of the Solvency II Directive. The report provides an overview of the supervisory activities of EIOPA in 2018, in addition to outlining the progress made and challenges faced in achieving supervisory convergence across member states. The priorities for 2018 remain; however, new activities and milestones have been identified for each priority area.
New supervisory activities include work on conduct of business supervisory practices under the Supervisory Handbook, analysis of the consistency of technical provisions best estimate calculation, analysis of the supervision of run-off undertakings, and the promotion of supervisory convergence in the European pensions sector regarding the implementation of Institutions for occupational retirement provision (IORPs) II. The focus on cross-border activities will involve ongoing monitoring of the market to detect, handle, and follow-up on identified risks including developing data related aspects and in preemptively identifying prudential and conduct related issues; the focus also includes emphasis on cross-border activities, both for standard formula and internal model undertakings, via the colleges, bilateral engagements with group supervisors, and cooperation platforms.
Another focus area will be on developing good practices on the ongoing supervision of validation standards and assessing whether and how solvency capital reporting requirements could be improved, to lay the foundation for future internal model ongoing appropriateness indicators. EIOPA will perform assessment of internal model outcomes, via comparative studies on the outcomes of internal models regarding underwriting risks (for main non-life lines of business) and market and credit risks, with an analysis of potential model drifts over time. Toward ensuring a level playing field and avoiding supervisory arbitrage, EIOPA plans to analyze the consistency of the treatment of risk-mitigation techniques and of other financial instruments that may be used to reduce Solvency Capital Requirements
In the area of supervisory assessment of conduct risk, EIOPA will work on the conduct of business chapters for the Supervisory Handbook—namely on (in this order) supervision of product oversight and governance requirements; further guidance on how to implement risk-based conduct of business supervision; and supervision of the implementation the packaged retail insurance-based investment product key information document (PRIIPs KID). With respect to the supervision of emerging risks, EOIPA will work to:
- Develop good practices on the supervision of data management, data quality, and IT security governance
- Promote awareness and perform first steps toward the implementation of a cyber resilience framework
- Develop guidelines on information and communication technology (ICT) security and governance
- Promote pilot discussions regarding cyber resilience testing for large insurers
- Conduct thematic review on big data analytics
- Ensure a high-level of supervisory standards with the EU27, while establishing a new relationship with the UK under the revised terms; EIOPA will monitor any stability issues in the run up to and following the exit of the UK from the EU, including during any transitional period
- Assess the impact of IBOR transition in insurance and reinsurance undertakings from different perspectives, including impact on the Risk Free Rate methodology
The publication of this report followed the publication of the booklet on Common Supervisory Culture in November 2017 and the Supervisory Convergence Plan for 2018-2019 in April 2018. These documents set out the approach of EIOPA to supervisory convergence—by building common benchmarks for supervisory practices, reviewing the practices, and conducting its own independent assessment.
- Report on Supervisory Activities (PDF)
- Common Supervisory Culture (PDF)
- Supervisory Convergence Plan for 2018 -2019 (PDF)
Keywords: Europe, EU, Insurance, Solvency II, Supervisory Priorities, Internal Model, Insurtech, Cyber Risk, IBOR, Reporting, PRIIPs, KID, EIOPA
Previous ArticleEBA Single Rulebook Q&A: Second Update for April 2019
FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).
BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.
FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.
EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.
ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.
PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).
US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).
US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.