EIOPA Sets Out Supervisory Convergence Plan for 2022
The European Insurance and Occupational Pensions Authority (EIOPA) set out the supervisory convergence plan for 2022. Starting the discussion with the priorities for 2021, this plan outlines the supervisory convergence priorities for the coming year as well. This year, EIOPA will continue to focus on proportionality in supervision; supervisory assessment of conduct risks; environmental, social, and governance (ESG) issues; and group supervision policy. EIOPA will also focus on supervisory convergence tools for calculation of technical provisions, conduction of benchmarking study on internal models, implementation of the new framework on digital operational resilience (DORA), and the development of a supervisory convergence tool on cyber underwriting.
The following are the key highlights of the work priorities for this year:
- Risk assessment framework and application of proportionality. Following a publication of the proposal amending the Solvency II Directive, EIOPA continues conducting internal preparatory work to support the future implementation of the framework, with goal of issuing operational guidance for the application of the new framework on proportionality when it will be in force.
- Supervisory approach to ESG risks. EIOPA will focus on conclusion of the work on EIOPA Supervisory Handbook, addressing the supervision of climate-related risks in Solvency II Pillar 2. Following the publication of EIOPA’s Opinion on the supervision of the use of climate changes
risk scenarios in own risk and solvency assessment, or ORSA, in 2021 and the incorporation in the Solvency II 2020 Review proposal of the requirement for long-term climate change scenario analysis, EIOPA will publish application guidance to facilitate implementation by undertakings (especially SMEs). A pilot exercise to test the application of the guidance with volunteering undertakings and national competent authorities will be conducted by the first half of 2022. Additionally, as part of the conduct oversight, EIOPA will collect data on ESG products as part of EIOPA’s Cost and Past Performance analysis. - Suptech. EIOPA intends to launch the assessment of the feasibility of the implementation of a suptech solution that would allow EIOPA and the other national competent authorities to collect the information of the Packaged Retail and Insurance-based Investment Products (PRIIPs) Key Information Document of Insurance-based investment products products sold in the European Union.
- Calculation of technical provisions. EIOPA plans to publish (new and amended) guidelines on best estimate valuation and guidelines on contract boundaries during the first half of the year. EIOPA also plans to finalize the revision of the technical provisions chapter of EIOPA Supervisory Handbook during the first half of the year, including also a section on supervision of negative best estimate.
- Assessment of internal model outcomes. During the year, EIOPA will continue its work with the three comparative studies on the outcomes of internal models regarding the modeling of non-life risks, market and credit risks, and the modeling of diversification benefits.
- Information technology security and governance-related risks, including cyber risk. Following the publication in September 2020 of European Commission’s proposal for the Digital Operational Resilience Act (DORA), EIOPA will continue preparatory work on the implementation of DORA. Particularly, EIOPA will work on a system for the exchange between competent authorities of information regarding cybersecurity and cyber-attacks and monitor the implementation of the EIOPA guidelines on information and communications technology security and governance to identify concrete proportionate implementation aspects. EIOPA will also contribute to the establishment of a Digital Operational Resilience Framework with special focus to the cyber incident reporting and cyber resilience testing and on the implementation of proportionality principle.
- Digital transformation. EIOPA plans to focus on specific artificial intelligence use cases in insurance or assessing the topic of financial inclusion in the digital age. In this regard, EIOPA will take into account the legislative developments of the Artificial Intelligence Act and the implementation of the European Commission’s Digital Finance Strategy. EIOPA will participate and promote relevant discussions in the area on the insurance and pension sector in the European Forum of Innovation Facilitators. EIOPA will also develop supervisory convergence tools to support national competent authorities in the performance of the business model analysis in the context of the insurance digital market.
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Keywords: Europe, EU, Insurance, Solvency II, Supervisory Convergence, Suptech, ESG, Cyber Risk, Proportionality, Internal Models, DORA, Digital Operational Resilience Act, Operational Resilience, Credit Risk, Market Risk, EIOPA
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