Question ID: 485
Regulation Reference: Guidelines on group solvency
Article: 213, 214
Status: Final
Date of submission: 18 Dec 2015
Question
According to GL 1 of EIOPA guidelines on group solvency, the participating insurance or reinsurance undertaking, the insurance holding company or the mixed financial holding company responsible for calculating the group solvency should ensure that they cover all risks and related undertakings belonging to the group, unless excluded according to Article 214 (2) of the Solvency II Directive. GL 4 of EIOPA guidelines on group solvency refers to different cases of application of group supervision referred in Article 213 (2) (a) to (d) of the Solvency II Directive. Is a group supervisor allowed to exclude an undertaking or undertakings from the scope of group supervision according to Article 214(2) of Directive 2009/138/EC, if in practice it would result in non-application of group supervision required according to Article 213 of the Directive, including calculation of group solvency?
EIOPA answer
Pursuant to Article 213(1) of the Solvency II Directive, Member States shall provide for the supervision of insurance groups. The Directive does not include any provision empowering National Supervisory Authorities to depart from the obligation mentioned in Article 213(1) as a consequence of any discretion available to them and hence not to apply group supervision.
At the same time, the possibility to exclude an undertaking from the scope of group supervision provided in Article 214(2) is an option which can be exercised by National Supervisory Authorities at their sole discretion, based on their assessment whether the criteria mentioned in this Article are fulfilled.
The Directive does not explicitly provide for the possibility that the result of applying Article 214(2) might be the non-application of group supervision. EIOPA considers that this specific consequence should be taken into account by the group supervisor in assessing whether the criteria in Article 214(2) are met. EIOPA has not been able to envisage any circumstances in which it would be possible to exclude an undertaking from the scope of the group supervision when it leads to not applying group supervision, especially on the basis that an undertaking is of negligible interest with respect to the objectives of group supervision. Also, where an undertaking is at the head of a group at which group supervision has to be exercised, then its assets and liabilities are presumed to be fundamental to the calculation of the group solvency position and accordingly the undertaking would not be of negligible interest. In case the decision to apply Article 214(2) has a consequence of non-applying group supervision, the underlying circumstances and the validity of such a decision should be monitored on a regular basis.
The above approach is in line with the proportionality principle. Depending on the nature, scale and complexity of the risks of the group, the group supervisor considers the proportionality principle in the application of group supervision.