Skip to main content
European Insurance and Occupational Pensions Authority

1283

Q&A

Question ID: 1283

Regulation Reference: Guidelines on system of governance

Article: 49

Status: Final

Date of submission: 14 Nov 2017

Question

Should "critical or important functions or activities" be interpreted uniformely by member states?

More precisely if an Insurance company designates an expert who establishes the existence of a damage (and   sometimes its amount even if the Insurance company is not bound by this amount), does this qualify under outsourcing "critical or important functions or activities" that are insurance activities? 

EIOPA answer

EIOPA Guidelines on system of governance (in particular, Guideline 60) stipulate that it is the undertaking who “should determine and document whether the outsourced function or activity is a critical or important function or activity on the basis of whether this function or activity is essential to the operation of the undertaking as it would be unable to deliver its services to policyholders without the function or activity.”

In determining whether an outsourced function or activity is critical or important the undertaking has to take into account any definition or list of such functions or activities provided under national law or national administrative interpretation. Not every provision of a function or service to an undertaking by a service provider will fall within the definition of outsourcing.
 
We refer to the explanatory text to Guideline 60, which is available in the final report on the consultation on these guidelines which provides further explanation (not subject to the obligation for national competent authorities to comply-or-explain) on how undertakings might decide whether an arrangement falls within the definition of outsourcing and whether the outsourced function or activity is a critical or important activity. (https://eiopa.europa.eu/Publications/Consultations/EIOPA_EIOPA-BoS-14-253-Final%20report_Governance.pdf, see p. 99, paragraphs 2.287-2.292)

It is likely that the function described is critical or important, but the one-off appointment of an expert for the service may not necessarily amount to outsourcing. The more substantial or frequent the advice or service provided is, the more likely it is to fall within the definition of outsourcing.