EIOPA publishes information on the use of exemptions and limitations from regular supervisory reporting

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The European Insurance and Occupational Pensions Authority (EIOPA) published today its annual reports on the use of exemptions and limitations from the regular supervisory reporting, and on the use of capital add-ons by national competent authorities (NCAs). The report on Capital Add-Ons (CAOs) is published for the first time. The report on exemptions and limitations covers reporting on exemptions for the whole of 2016 and on limitations for the first quarter of 2017.

Insurance and reinsurance undertakings are subject to annual and quarterly reporting. According to the Solvency II Directive NCAs can exempt or limit the submission of the quantitative reporting templates (QRTs), based on the criteria such as a defined threshold of the life and non-life market shares in a country, or the size of an undertaking.

The report on exemptions and limitations shows that the exemptions from annual reporting concern 134 undertakings and 8 groups, and limitations from quarterly reporting concern 703 undertakings and 21 groups. Twenty-one NCAs have not authorised any undertaking to use exemptions or limitations as many of them were planning to collect at least a complete set of annual reporting before taking a decision on the limitations or exemptions.

The market share of undertakings benefiting from limitations stays below the maximum of 20% set in the Solvency II Directive.

As at year-end 2016, four Member States have imposed a total of 20 CAOs at individual undertaking level and one Member State has imposed a total of 4 CAOs at group level.

Most of the CAOs are related to cases where the risk profile of the undertaking deviated significantly from the assumptions underlying the Solvency Capital Requirement calculated under the standard formula.

The CAOs set, vary from 2% to 85% as part of the total Solvency Capital Requirement of the undertaking.

Twenty-two Member States implemented a regulation to make use of the option not to disclose capital add-ons for a transitional period.

Background

• Limitation: Under Article 35(6) undertakings can be exempted from quarterly reporting, and any template can be subject to a limitation from regular reporting, without prejudice to Article 129(4) of the Solvency II Directive as regards the Minimum capital requirement (MCR), i.e. the template regarding MCR information cannot be exempted
• Exemption: Under Article 35(7) undertakings can be exempted from both quarterly and annual reporting, on an item-by-item basis
• Solvency II Directive defines that exemptions or limitations should only be given to undertakings that cumulatively represent less than 20% of a Member State's life and non-life market share respectively
• Capital add-ons: Under Article 37 and 232 NCAs have the possibility to set CAOs for a (re)insurance undertaking or for a group. That possibility shall exist only where there has been a significant risk profile deviation from the assumptions underlying the standard formula or an internal model; or where there has been a significant system of governance issue; or where there has been a significant risk profile deviation from the assumptions underlying the matching adjustment, volatility adjustment or transitional measures.