Insurance Regulatory eBulletin - EIOPA

EIOPA consults on amendments to the ITS on reporting and disclosure
On 28 March, EIOPA published its consultation on corrections and amendments to the Implementing Technical Standards (ITS) on reporting and disclosure. The proposed corrections and amendments are aimed at improving the understanding of the current requirements, the consistent application of the technical standards and facilitating the reporting and disclosure, as well as improving the quality of the information reported and disclosed.

In addition, the consultation package includes one correction to EIOPA's Guidelines on Financial Stability Reporting and new validations to be applied to the information submitted by reporting entities under the implementing technical standard on reporting. The validations will be embedded into the XBRL taxonomy version 2.3.0 to be published in July 2018.

EIOPA is seeking feedback by 11 May 2018.

EC Report on amending Solvency II for group internal model supervision
On 5 April, the European Commission (EC) published a report on the application of Title III of the Solvency II Directive regarding the supervision of insurance and reinsurance undertakings in a group, and the assessment of the transitional period for the occupational retirement provision business of life insurance undertakings.

The report concludes that in the supervision and approval of group internal models divergences are occurring among Member States and EIOPA needs enhanced powers to bring about convergence, therefore this requires a legislative amendment to the Solvency II Directive.

Accordingly, the EC are proposing amendments to Solvency II to:

  • give EIOPA a greater role in ensuring supervisory convergence in the area of internal model applications (at solo and group level) and with respect to information-sharing on such applications; and
  • allow EIOPA to issue opinions in this regard and assist in the settlement of disputes between supervisory authorities, at their request, on its own initiative or, in certain circumstances, at the request of concerned undertakings.
Joint Committee Report on risks and vulnerabilities in the EU financial system
On 12 April, the Joint Committee of the European Supervisory Authorities (Joint Committee), published a report on the risks and vulnerabilities in the EU financial system.

The key findings of the report were:
  • valuation risk and the potential for sudden risk premia reversals remained a major concern in the second half of 2017;
  • uncertainties around the terms of the UK’s withdrawal from the EU still have the potential to expose the EU27 and the UK to economic and financial instability and to weaken market confidence, in particular if negotiations end in a disorderly fashion;
  • cyber risks have become a significant and highly escalating threat to investor protection, the financial markets and their stability worldwide; and
  • climate change and the transition to a lower-carbon economy raise concerns about the sustainability of investments across large parts of the financial sector.
The Joint Committee advised the following policy actions by the ESAs, national competent authorities and financial institutions:
  • against the backdrop of the potential for sudden risk premia reversals, the development and regular use of stress tests across all sectors remains crucial;
  • EU financial institutions and their counterparties, as well as investors and retail consumers should consider appropriate mitigation actions to prepare for the UK’s withdrawal from the EU in a timely manner;
  • supervisors should continue to encourage financial institutions to improve fragile IT systems, explore the risk that they are undertaking in the context of information security and address concerns about connectivity and outsourcing to third-party providers; and
  • financial institutions should be encouraged to take a more forward-looking approach to include sustainability risk in their governance and risk management frameworks, and to develop responsible, sustainable financial products.
Q&A on regulation
On 18 April, EIOPA announced the publication of the new sets of questions and answers on the regulations including:
  • (EU) No 2015-2450 templates for the submission of information to the supervisory authorities;  
  • (EU) No 2015-2011 with regard to the lists of regional governments and local authorities;
  • (EU) No 2015-2451 with regard to internal models; and
  • (EU) 2016-97 on insurance distribution.
EIOPA Oversight Activities 2017
On 18 April, EIOPA published its 2017 Oversight Activities report. In 2017, EIOPA undertook a range of oversight activities to meet the objective of enhanced supervisory convergence and to increase the quality, effectiveness and efficiency of supervision. This report outlines those activities in further detail, including: supervisory opinions; consistency projects on internal models; and, cooperation platforms. EIOPA's report also sets out its priorities for 2018 which include:
  • close interaction with national supervisory authorities in order to enhance the efficiency and effectiveness of the European supervisory system with a particular focus on cross border activities, either within an insurance group structure or via passporting;
  • improvements in supervisory practices in the authorisation process, by critically examining the viability of the business model, and in the assessment of fitness and propriety of key staff in / or owners of insurance undertakings; and
  • supporting reviews of business models in order to be able to have appropriate and timely supervisory actions by the concerned national supervisory authority where business models pose material prudential and / or conduct risks.
Supervisory Convergence Plan 2018-2019
On 25 April, EIOPA published its Supervisory Convergence Plan for 2018-2019, which addresses how EIOPA intends to build supervisory convergence across Europe. Supervisory convergence is EIOPA's main strategic goal over the coming years and is aimed at ensuring a similar level of protection for policyholders and beneficiaries across different jurisdictions. The plan includes:
  • an outline of the foundation of a common supervisory culture across Europe;
  • an overview of supervisory convergence to date and prospective action on supervisory convergence; and
  • an explanation of the criteria considered in determining priorities for action.
The plan incorporates an outline of EIOPA's convergence goals for 2018-2019, focusing on the insurance sector, implementation of the Solvency II Directive, and conduct of business supervision.

EIOPA is intending to focus specifically on practical implementation of the common supervisory culture and supervisory tool development, on risks to the internal market and a level playing field that otherwise may result in supervisory arbitrage, and the supervision of emerging risks.