EIOPA’s review of the Solvency II framework, the purpose of which was to ensure that the Solvency II regime remains fit for purpose, concluded with the submission to the European Commission and publication of EIOPA’s ‘Opinion on the 2020 review of Solvency II’ on 17 December 2020.
The European Commission’s proposal on the EIOPA submission is expected in Q3 2021.
Three broad themes emerged from EIOPA’s review:
- the need for proper recognition of the economic situation, with specific focus on the capital requirement for interest rate risk. For example, EIOPA has proposed an increase in the capital requirement for the interest rate to reflect the steep fall of interest rates experienced in recent years and the existence of negative interest rates.
- the updating of the current regulatory framework should result in a balanced overall impact on insurers. EIOPA has advised that proportionality should be increased across the three pillars of Solvency II, especially with regard to low risk undertakings.
- the requirement for enhanced policyholder protection via macro-prudential tools, recovery and resolution measures and insurance guarantee schemes.
Insurance Distribution Directive (IDD) Single Rulebook
The European Insurance and Occupational Pensions Authority (EIOPA) launched its Insurance Distribution Directive (IDD) Single Rulebook on 8 April 2021. The Single Rulebook is an online tool that further promotes the consistent implementation of the regulatory framework for insurance supervision. It will enable the easy navigation across different legal acts such as Directives, Delegated and Implementing Regulations, as well as EIOPA Guidelines and IDD questions and answers submitted via EIOPA’s dedicated Q&A process. The aim of this tool is to improve the understanding of the applicable rules.
Use of climate change risk scenarios in Own Risk and Solvency Assessment (ORSA)
The European Insurance and Occupational Pensions Authority (EIOPA) has noted it is essential for the industry take a forward-looking management of climate change risks to ensure the long-term solvency and viability of the insurance industry. In its opinion addressed to national supervisory authorities, EIOPA sets out expectations on the supervision of the integration of climate change risk scenarios by insurers in the Own Risk and Solvency Assessment (ORSA).
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Open consultations and surveys
- Consultation on the proposal for revised Guidelines on the use of Legal Entity Identifier (LEI). Deadline: 30/06/2021
- Consultation on framework to address value for money risk in the European unit-linked market. Deadline: 16/07/2021
- Discussion paper on blockchain and smart contracts in insurance. Deadline: 29/07/2021
- Non-Life Underwriting Risk Comparative Study in Internal Models. Deadline: 1/10/2021
