Featured Product

    EIOPA Report Analyzes Use and Impact of Long-Term Guarantee Measures

    December 17, 2019

    EIOPA submitted—to the European Parliament, the Council of the European Union, and EC—its 2019 and fourth annual report on long-term guarantee measures and measures on equity risk. The analysis carried out by EIOPA in the annual reports on long-term guarantees measures and measures on equity risk will serve as a basis for the Opinion on the 2020 review of Solvency II. This year's results show that most of the measures are widely used. Consistent with the trends observed in the last years, availability of long-term guarantee products is mainly stable or decreasing across the European Economic Area. Overall, the national supervisory authorities have observed a decrease in the size and duration of guarantees.

    The results show that 699 insurance and reinsurance undertakings in 22 countries with a European market share of 75% use at least one of the following voluntary measures:

    • The matching adjustment
    • The volatility adjustment
    • The transitional measures on the risk-free interest rates
    • The transitional measures on technical provisions
    • The duration-based equity risk sub-module

    The volatility adjustment and the transitional measure on technical provisions are particularly widely used. The volatility adjustment is applied by 660 undertakings in 22 countries to mitigate the effect of exaggerations of bonds spreads. The transitional measure on technical provisions is applied by 159 undertakings in 11 countries with respect to contracts concluded before the start of Solvency II to ensure a smooth transition to the new regime. The average Solvency Capital Requirement ratio of undertakings using the voluntary measures is 235% and would drop to 159% if the measures were not applied. This confirms the importance of these measures for the financial position of insurance and reinsurance undertakings.

    In addition to the long-term voluntary measures, the report analyzes the impact of the extrapolation of risk-free interest rates; for that purpose, an information request to insurance and reinsurance undertakings was carried out by EIOPA. Undertakings assessed the impact of two scenarios to change parameters of the extrapolation. At EUR level, scenario 1 (increase of the last liquid point for the euro from 20 to 30 years) would result in a reduction of the Solvency Capital Requirement ratio by 31 percentage points and scenario 2 (increase of the last liquid point for the euro from 20 to 50 years) would result in a reduction of the Solvency Capital Requirement ratio by 52 percentage points. 

    The Solvency II Directive requires a review of the long-term guarantee measures and the measures on equity risk until January 01, 2021. As part of this review, EIOPA reports annually on the impact of the application of the long-term guarantee measures and the measures on equity risk to the European Parliament, the Council of the European Union, and EC. EIOPA also plans to submit the opinion on the assessment of the application of the long-term guarantee measures and the measures on equity risk to EC in 2020, based on the annual reports submitted by then. EIOPA will provide its final assessment, including eventual proposed changes regarding the measures, by June 30, 2020.

     

    Related Links

    Keywords: Europe, EU, Insurance, Solvency II, Long-Term Guarantee, Matching Adjustment, Volatility Adjustment, SCR, EIOPA

    Featured Experts
    Related Articles
    News

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News
    News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8596