EIOPA consults on a second set of Advice for the Review of the Solvency Capital Requirements

Today, the European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on a second set of Advice for the review of the Solvency Capital Requirement (SCR) of Solvency II as foreseen in the Directive and its Delegated Acts. This consultation focuses on the remaining elements in the review of the SCR standard formula not covered by the Advice submitted to the European Commission on 30 October 2017.

With this consultation EIOPA continues the important Solvency II review process with the aim:

· To ensure a proportionate and technically robust, risk-sensitive and consistent supervisory regime for insurance sector

· To propose possible simplifications

EIOPA is consulting on overarching aspects of the SCR standard formula and soliciting stakeholder feedback on key sub-modules such as the loss-absorbing capacity of deferred taxes calculation, the calculation of non-life and life underwriting risks, catastrophe risks, unrated debt and unlisted equity and other topics such as cost of capital in the calculation of the risk margin.

Stakeholders’ responses are important for taking informed decisions on technically sound advice and achieving the SCR review’s objectives. EIOPA has already engaged in significant dialogue with stakeholders during the preparation of the consultation paper.

The outcome of the consultation will result in the second set of Advice to be submitted to the European Commission by end-February 2018. The consultation period ends on Friday, 5 January 2018.

The consultation paper and the template for comments can be viewed here.

Background

A first set of Advice focused on the following items: simplified calculations, look-through approach for investment related vehicles, reducing reliance on external credit ratings, treatment of guarantees and exposures to regional governments and local authorities, risk-mitigation techniques, undertaking specific parameters and information on loss-absorbing capacity of deferred taxes.

The second set of Advice includes all other items arising from the calls for technical advice: risk margin, simplifying the look-through approach, key principles on loss-absorbing capacity of deferred taxes, premium and reserve risks, catastrophe risks, mortality and longevity risks, counterparty default risk, currency risk at group level, interest rate risk, own funds, unrated bonds and loans, unlisted equity and strategic participations.