Insurance Regulatory eBulletin - EIOPA

EIOPA recommends further simplifications to the calculation of insurers' capital requirements
On 28 February 2018, EIOPA issued its second and final set of Advice to the European Commission on the Solvency Capital Requirement (SCR) standard formula. EIOPA submitted a first set of Advice to the European Commission in October 2017.

In a very lengthy paper, EIOPA is recommending a mixture of revised calibrations, simplifications and, where needed, proposals to achieve greater supervisory convergence. EIOPA recognises the availability of more recent data requires revised calibrations in a number of areas such as natural catastrophe risks, assistance and medical expenses, as well as legal expenses risks. EIOPA is advising further simplification of calculations for natural, man-made and health catastrophes, in particular fire risk and mass accident. Other simplifications include the treatment of the look-through principle on underlying investments.

The Advice is accompanied by a full impact assessment, which considers the overall impact of both sets of Advice and provides an assessment of the components of this second Advice and reflects the intensive engagement with stakeholders since the start of the exercise in 2016.

Q&A on regulation
On 7 March, EIOPA published new sets of questions and answers on:

  • (EU) No 2015-2450 with regard to the 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;
  • Answers to questions on Commission Delegated Regulation (EU) 2015/35 supplementing Directive 2009/138/EC;
  • Answers to questions on Guidelines on reporting and public disclosure.
Joint Committee final report on big data
One of the tasks of the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA), collectively referred to as the European Supervisory Authorities (ESAs), is to monitor any emerging risks for consumers and financial institutions as well as new and existing financial activities and to adopt measures, where needed, with a view to promoting consumer protection and the safety and soundness of markets and convergence in regulatory practices. The coordination of the ESAs’ actions in these areas takes place within the Joint Committee.

On 15 March, the Joint Committee published a final report on the use of big data by financial institutions in the EU. The report follows the Discussion Paper issued by the Joint Committee in December 2016 to which stakeholders were asked to respond by mid March 2017.

In the report the ESAs noted the continued increase in the use of big data, albeit to varying extents, across the banking, insurance and securities sectors and across different EU member states. Several risks to the objectives of the ESAs were noted in the report but it concludes that the current legislative requirements constitute a solid framework to mitigate the risks identified. The ESAs also note that this framework will be further strengthened with the entry into application of several key pieces of legislation in the financial sector (e.g. IDD, MIFID II, PSD2) as well as in the data protection sector (notably, GDPR).

The ESAs will continue to monitor how and to which extent these additional requirements will contribute to further mitigate the risks identified in the report.

Mitigating systemic risk through Solvency II
On 21 March, EIOPA published the second in a series of papers contributing to the debate on systemic risk and macro-prudential policy. Until now, the debate has mainly focused on the banking sector due to its prominent role in the recent financial crisis. Through this series of papers, EIOPA is aiming to ensure that any further extension of the debate to the insurance sector fully reflects the industry's specific nature.

This second paper identifies, classifies and provides a preliminary assessment of the tools or measures already existing within the Solvency II framework, which could mitigate any of the systemic risk sources that were identified in the EIOPA's first paper 'Systemic risk and macro-prudential policy in insurance' published in February. The paper also includes a detained annex on the macro-prudential impact of some of the long-term guarantees measures under stress.