Featured Product

    EIOPA Proposes Solvency II Guide on Contracts and Technical Provisions

    July 14, 2021

    The European Insurance and Occupational Pensions Authority (EIOPA) is consulting on revisions to the Solvency II guidelines on contract boundaries and on valuation of technical provisions; the guidelines have been in place since the implementation of Solvency II in 2016. As part of the 2020 review of Solvency II, EIOPA had identified several divergent practices on the implementation and supervision of the calculation of technical provisions. Thus, EIOPA is proposing changes to ensure a convergent application of Solvency II and its delegated regulation in this area. The comment period on this consultation ends on November 12, 2021, post which EIOPA will publish a final report on the consultation and submit the guidelines for adoption by its Board of Supervisors.

    The proposed guidelines on contract boundaries are intended to promote consistent application of an insurance or reinsurance contract boundary. A contract boundary specifies whether the additional cover arising from policyholders’ options is regarded as existing or future business. The proposed guidelines provide further guidance on the existing requirements. They focus on the unbundling of an insurance and reinsurance contract and the assessment whether a financial guarantee or a cover has a discernible effect on the economics of the contract. In particular, the new guidance focuses on the aim of unbundling, ensuring that a contract has the same treatment regardless whether it is sold as one contract or as two independent contracts where both are equivalent in terms of risk. The guidelines help to determine which insurance or reinsurance obligations with regard to future premiums arise in relation to a contract in accordance with Articles 17 and 18 of Commission Delegated Regulation 2015/35; they are addressed to supervisory authorities under Solvency II. 

    The proposed guidelines on valuation of technical provisions are intended to enhance consistency and convergence of professional practices for all types and sizes of undertakings across the EU member states and to support undertakings in calculating their technical provisions under Solvency II. The proposed guidelines introduce new guidance and amend the current guidance on topics that are relevant for the valuation of best estimate, including the use of future management actions and expert judgment; the modeling of expenses and the valuation of options and guarantees by economic scenarios generators; and modeling of policyholder behavior. EIOPA also identified the need for clarification in the calculation of expected profits in future premium. In the new and amended guidelines, EIOPA would clarify that, where contracts with material options and guarantees exist, undertakings are expected to use a valuation method that captures the time value of these contracts. The guidance on addressing expert judgement, a key component of the calculation of technical provisions, is being proposed based on the existing guidelines on the use of internal models, which were already applicable for technical provision valuation purposes. These guidelines are addressed to national competent authorities under Solvency II and will be ultimately applied both by actuaries and other professionals who may be appointed to perform tasks of the actuarial function.

     

    Related Links

    Comment Due Date: November 12, 2021

    Keywords: Europe, EU, Insurance, Solvency II, Solvency II Review, Technical Provisions, Contract Boundaries, Supervisory Convergence, EIOPA

    Featured Experts
    Related Articles
    News

    ISSB Sustainability Standards Expected to Become Global Baseline

    The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.

    September 18, 2023 WebPage Regulatory News
    News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.

    September 18, 2023 WebPage Regulatory News
    News

    BCBS Assesses NSFR and Large Exposures Rules in US

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.

    September 14, 2023 WebPage Regulatory News
    News

    Global Agencies Focus on ESG Data, Climate Litigation and Nature Risks

    At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.

    September 14, 2023 WebPage Regulatory News
    News

    ISSB Standards Shine Spotlight on Comparability of ESG Disclosures

    The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures

    August 22, 2023 WebPage Regulatory News
    News

    EBA Issues Several Regulatory and Reporting Updates for Banks

    The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.

    August 10, 2023 WebPage Regulatory News
    News

    BCBS Proposes to Revise Core Principles for Banking Supervision

    The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.

    August 04, 2023 WebPage Regulatory News
    News

    US Proposes Final Basel Rules, Transition Period to Start in July 2025

    The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.

    August 04, 2023 WebPage Regulatory News
    News

    FSB Report Outlines Next Steps for Climate Risk Roadmap

    The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.

    August 04, 2023 WebPage Regulatory News
    News

    EBA Plans on Ad-hoc ESG Data Collection and Climate Scenario Exercise

    The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.

    July 31, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8931