Featured Product

    EIOPA Outlines Solvency II Treatment of State Aid Schemes Amid Crisis

    July 21, 2020

    EIOPA published a supervisory statement on the Solvency II recognition of schemes based on reinsurance with regard to COVID-19 crisis and credit insurance. The statement outlines supervisory recommendations for national competent authorities while setting out views of EIOPA on the exceptional supervisory treatment—for Solvency II purposes—of schemes based on reinsurance implemented by member states. The schemes under discussion were implemented in the extraordinary context of the EC Temporary Framework for state aid measures to support the economy in the current COVID-19 outbreak, which was adopted on March 19, 2020.

    EIOPA has identified significant differences in the way that national schemes in the area of credit insurance are being implemented through the Temporary Framework. Therefore, to ensure a level playing field and consistent treatment of schemes with the same economic consequences as reinsurance, EIOPA outlined, in its statement, a number of supervisory recommendations for national competent authorities. The statement should not serve as a basis for the application of the Solvency II rules beyond the scope and validity of the Temporary Framework. The EIOPA statement outlines the following key recommendations for the treatment of schemes based on reinsurance:

    • EIOPA recommends competent authorities to allow insurers and reinsurers to consider schemes that transfer insurance risk to the government of a member state based on the Temporary Framework as having the same consequences as reinsurance as defined in the Solvency II Directive. Such treatment should lead the assets recognized by insurers and reinsurers under the scheme to be considered linked to reinsurance (for example, reinsurance recoverables or reinsurance receivables) for Solvency II purposes.
    • To recognize such schemes as risk-mitigation technique for Solvency Capital Requirement calculation, it still needs to be assessed whether the scheme complies with the relevant requirements of Articles 209-215 of the Commission Delegated Regulation (EU) 2015/35.
    • Considering that Solvency II regime assumes that governments of member states are solvent counterparties, EIOPA recommends competent authorities to allow insurers and reinsurers to consider that schemes based on reinsurance implemented through the government of a member state comply with the relevant requirements regarding the counterparty. However, other counterparties that are not authorized insurers or reinsurers nor the government of a member state are not allowed to do reinsurance activity. Therefore, any transfer of risk to them should not be considered as reinsurance activity.
    • Considering the temporary nature of government schemes allowed by the Temporary Framework, the forward-looking nature of the Solvency Capital Requirement has also been identified as a key aspect of the risk-mitigation technique assessment that requires a convergent approach.
    • Competent authorities should allow insurers and reinsurers to assume that the schemes will be extended in 2021 only where such extension has already been approved. However, for mid-year calculations such assumption may be allowed under the proportionality principle. Furthermore, insurers and reinsurers should clearly indicate the assumptions used in the calculation of the Solvency Capital Requirement in their Solvency and Financial Condition Report.


    Related Links

    Keywords: Europe, EU, Insurance, COVID-19, Solvency II, Reporting, SCR, SFCR, State Aid Rules, Temporary Framework, EC, EIOPA

    Featured Experts
    Related Articles
    News

    EBA Launches Stress Tests for Banks, Issues Other Updates

    The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.

    January 31, 2023 WebPage Regulatory News
    News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News
    News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8700