EIOPA

EIOPA’s key achievements: October 2017 – September 2018

On 8 October, EIOPA published a report setting out its key achievements between October 2017 and September 2018. The publication was a supplement to the annual hearing of the Economic and Monetary Affairs Committee at the European Parliament at which EIOPA’s work is discussed.

The Authority’s strategic priorities for 2018 are to:

  • strengthen the protection of consumers;
  • improve the functioning of the EU internal market in the field of pensions and insurance;
  • strengthen the financial stability of the insurance and occupational pension sectors;
  • be a responsible, competent and professional organisation.
The report details EIOPA’s key achievements against those priorities and these include, amongst others, implementation of the Insurance Distribution Directive, developing its supervisory convergence plan, driving the quality, consistency and convergence of supervision of internal models, improving cross-border supervisory cooperation, carrying out a review of Solvency II, and starting work on the implications of big data.

EIOPA reinforces supervisory cooperation over cross-border insurance distribution

On 10 October EIOPA published a decision on the co-operation of national competent authorities (NCAs) regarding the supervision of cross-border insurance distribution activities of insurance undertakings and insurance intermediaries. The decision entered into force on 1 October 2018, and replaces the former Luxembourg Protocol which had to be substantially revised as a result of the implementation of the Insurance Distribution Directive and recent supervisory experience.

The decision aims to strengthen co-operation between NCAs and to improve the exchange of all relevant information, thus enabling NCAs to fulfil their supervisory tasks and to protect customer interests. The decision is a step to ensure well-functioning, risk-based and preventive supervision of the insurance market throughout the EU. 

EIOPA’s analysis of IFRS 17 Insurance contracts

On 18 October EIOPA published a report on its analysis of IFRS 17 Insurance contracts aimed at fostering a better understanding of the implications and potential impacts of the new standard on European insurance and reinsurance undertakings as well as to provide insights into the future interplay between insurers' financial and prudential reporting.

Overall, EIOPA found that the increased transparency and comparability of insurers' financial statements through IFRS 17 should provide better insights into insurers' business models, and have the potential to strengthen financial stability in the European Economic Area (EEA). Therefore, EIOPA regards the implementation of IFRS 17 as beneficial for the European public good. IFRS 17's current, market-consistent and risk-sensitive measurement of insurance obligations better reflects economic reality. This supports efficient risk management and allows stakeholders to gain important insights into the entity's business model, exposures and performance.

However, EIOPA has reservations on a few concepts that may affect comparability and relevance of IFRS 17 financial statements such as: 

  • IFRS 17's principles on determining the applicable discount rate and risk adjustment may have exceeded the appropriate level of allowing for entity-specific inputs and consequently may give rise to significantly different and potentially incomparable results;
  • issues such as level of contracts' aggregation or gains from reinsurance contracts held may lead to further complexity of the financial statements.
EIOPA's Risk Dashboard for the second quarter 2018

On 22 October EIOPA published its updated Risk Dashboard based on second quarter 2018 data. It concludes that the overall the risk exposure of the European Union insurance sector remains stable. Macro risks continue at medium level amongst continued economic recovery and less expansionary monetary policy. However, due to political and international trade tensions, a possible future deterioration in the assessment cannot be excluded. Bond market volatility has decreased since June 2018. Overall Credit Default Swap (CDS) spreads remained largely stable at low levels notwithstanding adverse developments in sovereign bond markets in some countries. Liquidity and funding risks increased because of a higher average coupon-to-maturity ratio of a limited number of bond issuances. Overall, profitability has been stable and Solvency Capital Requirement (SCR) ratios are above 100% for most insurers.


charles.portsmouth@moorestephens.com