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1 SOLVENCY II
1.1 First batch of EIOPA consultations on technical standards under expected amendments to Solvency II Directive
On 1 October 2024, EIOPA published its first batch of consultation papers on technical standards which relate to anticipated changes under the Solvency II Directive1.
The batch is composed of the following consultation papers:
- Consultation paper on proposed regulatory technical standards (RTS) on liquidity risk management plans2: RTS outline which undertakings should include medium and long-term analyses as part of their liquidity risk management plans, the manner in which the content of the plans should be specified and how often they should be updated. Requirement for these RTS is set out in Articles 144a, 144d and 246a of the amended Solvency II Directive. The paper can be viewed here.
- Consultation Paper on proposed RTS to specify the criteria for the identification of exceptional sector-wide shocks3: set out as a requirement in Article 114c of the amended Solvency II Directive. The paper can be viewed here.
- Consultation paper on proposed RTS on factors for identifying undertakings4: set out as a requirement in Article 212 of the amended Solvency II Directive. The paper can be viewed here.
- Consultation paper on proposed Implementing Technical Standards (ITS) specifying the methodology to determine the best estimate for life obligations with options and guarantees5: set out as a requirement in Article 86(2a) of the amended Solvency II Directive. The paper can be viewed here.
- Consultation paper on proposed RTS on relevant insurance and reinsurance undertakings with respect to the host member state's market6: RTS establish the conditions and criteria for host supervisors to consider when assessing the relevance of cross-border activities to their market. Requirement for these RTS is set out in Article 152aa(2) of the amended Solvency II Directive. The paper can be found here.
Comments could be made on any of the above proposals up to 2 January 2025. EIOPA will publish a report to provide a summary of comments received and to issue revised proposals where appropriate.
1.2 Second batch of EIOPA consultations on technical standards and guidelines under Solvency II amending Directive
On 4 December 2024, EIOPA published its second batch of consultation papers containing technical standards, guidelines and a report addressing the changes made by the Solvency II amending Directive.7 The batch includes the following:
- Consultation Paper on a report on biodiversity risk management by insurers8: Proposal from EIOPA to examine how insurers identify, measure and manage biodiversity risks, along with how insurers assess the risk and solvency practices of undertakings. The paper can be found here.
- Consultation Paper on a proposal for RTS on management of sustainability risks, including sustainability risk plans9: Draft RTS setting out the minimum standards and reference methodologies with regard to sustainability risk identification, measurement, management and monitoring. RTS also address the elements to include in the plans and supervision and disclosure of such plans. The paper can be found here.
- Consultation Paper on guidelines regarding the notion of diversity for the selection of members of the administrative, management or supervisory body10: EIOPA proposed guidelines aim to promote a policy of diversity to determine the selection of members for the administrative, management and supervisory bodies of insurance and reinsurance undertakings. This includes quantitative gender balance objectives. The paper can be found here.
- Consultation Paper on revised guidelines on market and counterparty risk exposures in the standard formula11: Guidelines outlining the correct treatment of securities lending, borrowing transactions and repurchase or reverse repurchase agreements when calculating the counterparty default risk module of the solvency capital requirement. The paper can be found here.
- Consultation Paper on revised ITS on the lists of regional governments and local authorities' exposures who are to be treated as exposures to the central government12: Draft ITS remove the UK entities from the list and add four new types of entities from France and Latvia. The paper can be found here.
EIOPA invites comments and feedback to be submitted on the proposals until 26 February 2025. Once concluded, EIOPA will publish a report to contain revised proposals and a summary of stakeholder comments received.
The press release in relation to the publication of the second batch of Consultation Papers can be found here.
1.3 Council of the EU adopts IRRD and Solvency II Amending Directive following approval under the corrigendum procedure
On 8 October 2024, the European Parliament confirmed its approval of the following legislative proposals under the corrigendum procedure13:
- The Insurance Recovery and Resolution Directive (IRRD)14 proposal.
- The proposed Directive15 amending the Solvency II Directive.
The corrigendum for the IRRD had been published in August 2024, while the corrigendum for the Solvency II Amending Directive had been published in September 2024. These corrigenda were announced on 7 October 2024 at the beginning of the day's plenary session and in the absence of any MEP request for a vote, were approved 24 hours later.
The text of the IRRD16 and the text of the Solvency II Amending Directive17 were subsequently published as proposals on 16 October 2024.
The text of the proposed IRRD can be viewed here.
The text of the proposed Directive amending the Solvency II Directive can be viewed here.
On 5 November 2024, the Council of the EU announced by press release that it had adopted the IRRD and the Solvency II Amending Directive. The Directives will be published in the Official Journal of the European Union and come into force twenty days thereafter. As is customary, the provisions of the Directives will remain in force for two years from the date of entry into force.
The press release can be found here.
1.4 EIOPA consults on criteria for selecting insurers to run macroprudential analyses under Solvency II
On 17 October 2024, EIOPA published a consultation paper18 which proposes to amend the Solvency II Directive by establishing RTS on applicability criteria for macroprudential analysis in own risk and solvency assessment (ORSA) and the prudent person principle (PPP).
The paper imposes new obligations on insurance and reinsurance undertakings to include macroprudential analyses in the ORSA and PPP. Supervisory authorities will be required to analyse the ORSA report of undertakings, which are requested to examine and aggregate macroprudential considerations, and to advise undertakings as to considerations for future ORSAs. In particular, this will apply to macroprudential risks.
Insurance and reinsurance undertakings must also pay heed to macroprudential concerns when asked to determine an investment strategy by the relevant supervisory authority.
Under Article 144d(a)(i) and (ii) of the Solvency II Directive, EIOPA must set out draft RTS on the applicability criteria for supervisory authorities to consider when specifying the undertakings and groups that will be obliged to carry out macroprudential analyses in the ORSA and when applying the PPP.
The consultation continues until 9 January 2025, after which date EIOPA will issue a revised proposal in response to feedback received.
The press release can be viewed here.
The consultation paper can be viewed here.
1.5 Report on the use of limitations and exemptions in Solvency II reporting in the EEA
On 28 October 2024, the EIOPA published a report on the use of limitations and exemptions in Solvency II reporting in the EEA.19 The report provides an overview of the national competent authorities that afford limitations and/or exemptions from the Solvency II requirements to "solo" undertakings and groups within the EEA.
Under Article 35(6) of the Solvency II Directive, "solo" undertakings may be subject to a limitation such as a requirement to submit quarterly reporting information of reduced scope. An exemption from quarterly and annual reporting for such an undertaking applies under Article 35(7), on an item-by-item basis and under certain conditions.
The limitation to regular supervisory reporting can only be granted to undertakings that do not represent more than 20% of a Member State's life, non-life and reinsurance market share respectively. Groups can benefit from limitations and/or exemptions from reporting under Article 254(2), but only if the limitation and/or exemption would benefit all insurance or reinsurance undertakings. At all times, when determining the eligibility of the undertakings for limitations, priority is given to the smallest undertakings under Article 35 of the Solvency II Directive.
Background information and data concerning the limitations and/or exemptions at solo and group level can be found here.
The press release can be found here.
1.6 Proposal for a Directive amending Solvency II as regards proportionality, quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks and group and cross-border supervision
On 27 November 2024, the European Parliament and the Council published a proposal for a Directive which amends the Solvency II Directive by strengthening its principles of proportionality, its quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks and group and cross-border supervision.
While the proposal acknowledges that the Solvency II Directive has created more risk-based and more harmonised prudential rules for the insurance and reinsurance sector, it notes that certain provision of the Directive contain review clauses. In light of the long-lasting socio-economic damage of the COVID-19 pandemic, the proposal aims to tackle the areas of weakness affecting insurance and reinsurance undertakings.
The proposal can be viewed here.
Footnotes
1 2009/138/EC
2 EIOPA-BoS-24/320
3 EIOPA-BoS-24/322
4 Consultation Paper on proposed RTS on factors for identifying undertakings under dominant or significant influence and undertakings managed on a unified basis (EIOPA-BoS-24/323).
5 Consultation paper on proposed Implementing Technical Standards (ITS) specifying the methodology to determine the set of scenarios to be used for the prudent deterministic valuation of the best estimate for life obligations with options and guarantees (EIOPA-BoS-24/324)
6 EIOPA-BoS-24/325
7 2021/0295 (COD)
8 EIOPA-BoS-24-455
9 EIOPA-BoS-24-458
10 EIOPA-BoS-24-479
11 EIOPA-BoS-24/481
12 EIOPA-BoS-24/438
13 Rule 251(4), Parliament Rules of Procedure
14 2021/0296 (COD)
15 2021/0295 (COD)
16 PE-CONS 6/24
17 PE-CONS 6/24
18 EIOPA-BoS-24/321
19 EIOPA-BoS-24-124
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Originally published 20 January 2025
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