Featured Product

    EIOPA Publishes Statement on Adverse Interest Rate Environment

    February 20, 2020

    EIOPA published a supervisory statement on the impact of the ultra-low or negative interest rate environment on the insurance sector in EU. The statement starts by analyzing the impact of ultra-low or negative yields on the European insurance sector, provides an overview of the supervisory responses and the reactions of undertakings to such an environment, and provides a set of recommendations to mitigate the impact of the ultra-low or negative interest rate environment. This statement should be read along with the background note of EIOPA, which focuses on the supervisory powers and measures and the reactions of companies to the low interest rate environment.

    The statement highlights that the ultra-low or negative interest rate environment constitutes one of the most important sources of systemic risk for insurers for the coming years. Such an environment has an impact on both asset and liability sides of the balance sheet, affecting the solvency position and profitability of undertakings. The aim of the supervisory statement is to raise awareness and ensure that the insurance sector continues to be financially resilient. The statement also seeks to inform consumers and policyholders about supervisory measures and actions being taken to protect their interest. EIOPA encourages the national supervisory authorities and the undertakings in EU to continue taking actions to mitigate the impact of the ultra-low or negative interest rate environment on the EU insurance sector.

    EIOPA recommends that, in the medium-to-long-term, the national supervisory authorities should identify whether there are any tools or powers missing in their current toolkit. Where a gap is identified, the national authorities should request the missing powers. In the short-term, however, EIOPA recommends that:

    • National supervisory authorities should intensify the monitoring and supervision of insurers identified as facing greater exposure to the low interest rate environment;
    • National supervisory authorities should engage in dialog with undertakings to explore actions they could take to improve their financial resilience
    • Within the context of improving financial resilience and in particular sound capital planning, undertakings should exercise caution in distributing dividends and national supervisory authorities should consider whether it is necessary to restrict the distribution of dividends;
    • National supervisory authorities and undertakings should pay special attention on preemptive recovery and resolution planning to reduce the likelihood and impact of insurance failures 
    • National supervisory authorities should broaden the analysis of the low interest rate environment and also consider the potential build-up of systemic risk.

    The content of this document is aligned and should be read in conjunction with the policy proposals contained in the Consultation Paper on the Opinion on the 2020 Review of Solvency II. 

     

    Related Links

    Keywords: Europe, EU, Insurance, Interest Rate Risk, Systemic Risk, Solvency II, Recovery and Resolution Planning, Asset and Liability Management, ALM, 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