Featured Product

    EIOPA Publishes Report on Use of Capital Add-Ons Under Solvency II

    December 20, 2018

    EIOPA published the second annual report on the use of capital add-ons by national competent authorities under Solvency II. The report examines the evolution of the usage of capital add-ons from 2016 to 2017, along with the evolution of the processes of each authority. The objective is to contribute to a higher degree of supervisory convergence in the use of capital add-ons between supervisory authorities in the different member states and to highlight any concerns regarding the capital add-ons framework.

    The analysis is based on 2017 year-end Solvency II data, as reported by the undertakings and insurance groups via the Solvency II Quantitative Reporting Templates (QRTs) and an additional survey addressed to the national competent authorities from the 28 EU member states and three European economic area members. The report shows that a slight increase in the use of capital add-ons can be seen, although the overall usage remains extremely limited. During 2017, six national competent authorities have set capital add-ons to 23 solo insurance and reinsurance undertakings. This limited usage might be due to the negative image that is attributed to capital add-ons or to the level of judgment that is associated to the decision and calculation of the capital add-ons, which in turn inhibits supervisors from using it.

    Even if the capital add-ons are not used often, when used, they have a material impact on the Solvency Capital Requirement (SCR) of some of the entities. The weight of capital add-ons ranges from a low of 1% to a high of 83%, with an average of 30% of the total SCR. The capital add-on seems to be a good and positive measure to adjust the SCR to the risks of the undertaking, when the application of other measures is not adequate—such as the development of an internal model—as in 18 cases the capital add-on was already set in 2016. 

     

    Related Links

    Keywords: Europe, EU, Insurance, Solvency II, Capital Add-ons, SCR, Quantitative Reporting Templates, EIOPA

    Featured Experts
    Related Articles
    News

    PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK

    PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.

    April 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Standards on Methods of Prudential Consolidation

    EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).

    April 15, 2021 WebPage Regulatory News
    News

    EBA Updates List of Other Systemically Important Institutions in EU

    EBA updated the list of other systemically important institutions (O-SIIs) in EU.

    April 15, 2021 WebPage Regulatory News
    News

    BCBS Report Concludes Basel Risk Categories Can Capture Climate Risks

    BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.

    April 14, 2021 WebPage Regulatory News
    News

    UK Authorities Welcome FSB Review of their Remuneration Regime

    UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.

    April 14, 2021 WebPage Regulatory News
    News

    PRA and FCA Letter on Addressing Risks from Use of Deposit Aggregators

    PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.

    April 14, 2021 WebPage Regulatory News
    News

    MFSA to Amend Banking Act and Rules in Coming Months to Transpose CRD5

    MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.

    April 14, 2021 WebPage Regulatory News
    News

    EC Delegated Regulation on Specialized Lending Exposures Under CRR

    EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.

    April 14, 2021 WebPage Regulatory News
    News

    OSFI Proposes to Enhance Assurance Expectations for Basel Returns

    OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.

    April 13, 2021 WebPage Regulatory News
    News

    ECB Issues Results of Benchmarking Analysis of Recovery Plans of Banks

    ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.

    April 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6858