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European Insurance and Occupational Pensions Authority

1901

Q&A

Question ID: 1901

Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)

Topic: Solvency Capital Requirement (SCR)

Article: 158

Status: Final

Date of submission: 03 Apr 2019

Question

Pursuant to Article 158 of the Delegated Regulation (EU) 2015/35, shall the permanent increase of 4% be applied only to the amount of annuity benefits for claims already incurred, or shall it be applied also to the amount of future annuity benefits which are related to the “Expected Profit in Future Premiums”?

In addition, where multi-state modelling or a frequency-severity type of modelling is used for the valuation of specific health insurance products, shall the permanent increase of 4% be applied only to the percentage of the annuity benefits which is attributed to a particular state (e.g. disability) or shall it be applied to the entire amount of annuity benefits?

EIOPA answer

The answer to this question is provided by the European Commission.

Article 158 of the Delegated Regulation (EU) 2015/35 requires insurance and reinsurance undertakings to apply the permanent increase factor of 4% to the amount of annuity benefits payable under the underlying insurance policies where those benefits could increase as a result of changes in inflation, the legal environment or the state of health of the person insured.

This includes the amount of annuity benefits which concur to the determination of the own funds of insurance and reinsurance undertakings, therefore all health insurance products currently in-payment and the amount of annuity benefits to be paid in the future and that are considered for the calculation of technical provisions, including those related to premiums that are expected to be received in the future.

Article 158 of the Delegated Regulation (EU) 2015/35 does not specify that the permanent increase shall apply to specific factors or percentages of the annuity benefits. Therefore, where types of multi-state or frequency-severity modelling are used for the valuation of health insurance products, the permanent increase of 4% must be applied to the whole amount of payments and not exclusively to specific variables within the formula for calculating those payments, such as, for instance, percentages of payments that are associated to specific events or risks (e.g. disability).

Disclaimer provided by the European Commission:

The answers clarify provisions already contained in the applicable legislation. They do not extend in any way the rights and obligations deriving from such legislation nor do they introduce any additional requirements for the concerned operators and competent authorities. The answers are merely intended to assist natural or legal persons, including competent authorities and Union institutions and bodies, in clarifying the application or implementation of the relevant legal provisions. Only the Court of Justice of the European Union is competent to authoritatively interpret Union law. The views expressed in the internal Commission Decision cannot prejudge the position that the European Commission might take before the Union and national courts.