Call for input on the Solvency II reporting and disclosure review 2020

On 19 December, EIOPA invited stakeholders to submit input on its upcoming review of the reporting and disclosure requirements of Solvency II which will assess whether the requirements remain fit-for-purpose and in particular if the requirements allow a risk-based and proportionate approach. This will be undertaken as part of the 2020 Solvency II review. Opinions are particularly requested on the following topics:
  • supervisory reporting, including where there may be room for improvement regarding the consistency of SII reporting framework with other EU supervisory reporting frameworks, proposals for improving the limitation and exemptions process, how information on internal models could be further harmonised to ensure a minimum level of comparability between undertakings, and which areas of the Regular Supervisory Reporting could be improved; and
  • public disclosure, including how the SFCR could be improved to address all stakeholders, the advantages and disadvantages of the external audit requirements of the SFCR and their impact on the quality of the Report, whether the current language requirements are adequate, and ideas and proposals from the viewpoint of different business models.
Input to the dedicated survey should be submitted by 21 February 2019. EIOPA will consider the input provided and include it in the public consultation, during 2019, as part of its 2020 Solvency II reporting and disclosure review.

Report on the use of capital add-ons 2018

On 20 December, EIOPA published a report on the use of capital add-ons that analyses the application and use of the capital add-ons supervisory measure across EU Member States. The report is aimed at both informing stakeholders about their use and to detect and follow-up on potential inconsistent applications. EIOPA extracted the relevant data from the Solvency II QRT reporting, and surveyed supervisory representatives from the 28 European Union Member States. The survey sought to assess the usage of capital add-ons on both an individual and group level, as compared to the usage reported at the end of the 2016-2017 fiscal year. 

The UK utilised capital add-ons as follows:
  • Solo firms – 14 (2016 – 15) of the 23 (2017 – 20) EEA wide capital add-ons imposed; and
  • Groups – 4 (2017 -4) of the 6 (2017 – 4) EEA wide capital add-ons.
EIOPA will continue to analyse the development of the use of capital add-ons to monitor whether more experience will encourage NCAs to make more efficient use of this supervisory tool.

Seventh Consumer Trends Report

On 20 December, EIOPA published its seventh report on consumer trends in insurance and pensions. The report notes that certain trends in insurance are becoming more pronounced. This includes the continuous shift from insurance with profit participation products to newer index-linked and unit-linked ones, and the increased use of technology throughout the insurance value chain affecting the whole life-cycle of a product as well as the relationship between providers and consumers.

The report reviews market developments in life insurance, non-life insurance, motor insurance, medical expense insurance and accident and health insurance and also considers the number and source of complaints. Other topics that are considered include: sustainable finance, disclosures and provision of information, and issues relating to personal and occupational pensions. 

Bankruptcy of Qudos Insurance A/S – equal treatment of EU policyholders

On 20 December, EIOPA noted that Qudos Insurance A/S at the request of the Danish Financial Supervisory Authority (Finanstilsynet), had been declared bankrupt. Qudos Insurance A/S operates in Denmark, France, Germany, Greece, Ireland, Italy, Malta, Norway, Sweden and the United Kingdom. Finanstilsynet has confirmed that, following this court decision the Danish Guarantee Fund for non-life insurance undertakings will by triggered according to bankruptcy procedure under the existing regulatory framework, which covers all European policyholders.

On 21 December, the FCA noted the Danish Financial Supervisory Authority has declared Qudos Insurance A/S bankrupt. The FCA’s statement encourages existing Qudos policyholders to direct any queries to the insurance broker or firm who sold them their policy. The FCA notes that the Danish Guarantee Fund may cover some existing policies and that Qudos has been declared in default by the UK Financial Services Compensation Scheme, who also have further information page for UK customers of Qudos.

EIOPA Financial Stability Report December 2018

On 20 December, EIOPA published its financial stability report for 2018. The report notes that while the prolonged low interest rate environment is still challenging for insurers and pension funds, the risk of a sudden reassessment of risk premia has intensified over recent months. Valuations remain stretched in some bond and real estate markets, indicating that risk appetite is still elevated. A possible sudden reassessment of risk premia could affect the financial and solvency position of European life insurers and pension funds in the short term and sharply rising credit spreads could cause insurers and pension funds to suffer large losses in their fixed-income investment portfolios.

The report also highlights that although overall Solvency ratios of European insurers have slightly improved and remain high, the profitability of insurers is under increased pressure and similar observations can be made in the European occupational pension fund sector. Key emerging risks include climate and cyber related risks. 

Report on the use of limitations and exemptions from reporting 2018

On 20 December, EIOPA has published a report on limitations and exemptions on reporting under Solvency II. Under Article 35 of the Directive, National Competent Authorities (NCAs) may limit regular quarterly supervisory reporting and exempt certain undertakings from item-by-item reporting, where the submission of that information would be overly burdensome in relation to the nature, scale and complexity of the risks inherent in the business of the undertaking.

The report provides the figures for NCAs granting limitations to solo undertakings for quarterly reporting as well as reporting item-by-item templates, exemptions from quarterly reporting and annual reportin, the market share of undertakings which are allowed a limited quarterly reporting and the top three countries allowing exemptions by a number of undertakings.

The report also sets out the context of additional proportionate and risk-based approaches in reporting, using two examples – the derivatives and the look-through templates – to demonstrate the overall impact of proportionality measures used by NCAs.

In Q1 2018, the UK exempted 127 (Total EU – 791 exempt) undertakings from QRT reporting. Overall the number of exempt entities across the EU has risen in line with EIOPA’s expectation that the number would increase as predicted in last year’s report.

Report to the EC on Group Supervision and Capital Management under Solvency II

On 19 December, EIOPA published a report for the European Commission responding to its request for information on various aspects of Group Supervision of Insurance and Reinsurance Undertakings, and specifically, on topics related to the freedom of services (FoS) and freedom of establishment under Solvency II.
The report discusses:
  • the pre-Solvency II challenges and the benefits of Solvency II’s risk-based approach post implementation;
  • gaps in regulatory framework that lead to divergent supervisory practices; and
  • the benefits of the effective supervision of insurance groups.
  Q&A on regulation

On 21 December, EIOPA published new questions and answers regarding:
  • Directive 2009-138-EC of 25 of November of 2009 of the European Parliament;
  • (EU) No 2015-2450 templates for the submission of information to the supervisory authorities;
  • (EU) No 2015-2011 lists of regional governments local authorities exposures;
  • (EU) 2015-35 supplementing Directive 2009-138;
  • guidelines on reporting and public disclosure; and
  • other questions on the XBRL taxonomy.
On 17 January EIOPA published new sets of questions ​and answers on:
  • EU 2015-35 supplementing Directive 2009-138; and
  • EU 2015-2450 templates for the submission of information to the supervisory authorities.

EIOPA seeks evidence on integration of sustainability risks in Solvency II

On 17 January, EIOPA issued a call for evidence to obtain information from market participants regarding the integration of sustainability risks and factors in the prudential assessment of assets and liabilities for insurers and (re)insurers. EIOPA’s purpose is to assess whether Solvency II presents any inherent incentives and / or disincentives to sustainable investment, and to analyse how sustainability risks may affect (re)insurers' investments.

The deadline for submissions is 8 March 2019. 
charles.portsmo[email protected]