Showing posts with label EIOPA. Show all posts
Showing posts with label EIOPA. Show all posts

Thursday, 16 January 2020

AMICE response to Solvency II 2020 Review Consultation

Evolution of Europe’s insurance regulatory environment to benefit policyholders
 The Association of Mutual Insurers and Insurance Cooperatives in Europe (AMICE), the voice of the mutual and cooperative insurance sector in Europe, has today responded to the European Insurance and Occupational Pensions Authority’s (EIOPA) call for advice for the 2020 Review of Solvency II. In its response, AMICE welcomed the overall success of Solvency II as a regulatory framework, and agrees with EIOPA that this review should not result in a revolution, but in the adjustment of certain elements. It is important that this is not used as an opportunity to increase the regulatory burden; it is an opportunity to improve the current system in the light of four years’ experience since its implementation in 2016.
 Following a request by the European Commission, EIOPA in October 2019 published an 878-page consultation paper which includes suggestions to update almost all aspects of Solvency II. The consultation comprises 19 separate topics, which can be divided broadly into three parts:
 ▪ the review of the long-term guarantee measures; ▪ the potential introduction of new regulatory tools in the Solvency II Directive; ▪ revisions to the existing Solvency II framework.
 AMICE has highlighted three key areas in its response to EIOPA:
 1) Long-term measures and equity risk 
 This review is an opportunity to reduce procyclicality and rebalance capital requirements for certain investment classes, ensuring that our members can continue to play their vital long-term role in the European economy and that capital can be accessed in line with CMU objectives. AMICE has made several proposals to assist in achieving a proper reflection of the net risk profile of the long-term business model, and issued two position notes with concrete proposals for easy- to-apply fixes for the volatility adjustment (VA) and long-term equity. We are particularly concerned that the VA and extrapolation proposals need to be tackled in line with stakeholders’ interests, as we have detailed in our response.
 2) Macroprudential policies 
 The insurance sector has proven to be resilient in the face of economic challenges. There is little evidence that it contributes to systemic risk, particularly within the mutual sector. With these points in mind, AMICE believes that the regulatory tools within the Solvency II system are ensuring a robust insurance sector and providing appropriate protection for policyholders. In particular, the powerful governance tools, including the ORSA, in Pillar 2 of Solvency II are robust safeguards.
 3) Proportionality 
 Proportionality is embedded in the Solvency II Directive and the Delegated Regulation, but its application has been limited. This has resulted in a disproportionate regulatory burden, particularly for small and medium-sized insurers (many of which are mutuals), which does not properly reflect their risk profile or provide commensurate policyholder protection. AMICE supports proposals to increase the thresholds at which Solvency II applies to small insurers, to apply an appropriately calibrated regime for medium-sized insurers, and to ensure that the principle of proportionality works consistently in practice. AMICE has focused on proportionality within Solvency II for many years, and recently has made detailed submissions for practical solutions such as a regulatory “toolbox”.

 The highly technical topics presented in the EOIPA consultation have been discussed intensely by AMICEand its members prior to its collective response, which was submitted earlier today.
 The AMICE membership notes that while it supports the overarching principles of Solvency II - to ensure that EU policyholders enjoy the same level of protection regardless of where they buy insurance - the current regulation presents some shortcomings for the mutual and co-operative insurance sector. Since the introduction of Solvency II, mutual and co-operative insurers have called for a considered and proportional approach to its evolution.
 In its response to the call for advice for the 2020 review of Solvency II, AMICE recognises that some technical corrections are necessary, but also highlights that:
▪ progress should follow a principle-based regime: supervisory convergence should not lead to more legislation, and should deliver simplification of existing rules wherever possible, not result in unnecessary and overly burdensome complication. A measured approach to the introduction of new tools should be applied, particularly where existing tools are already fit for purpose, or still being developed;
 ▪ changes should not assume a ‘one size fits all’ approach.
While market consistency is desirable, regulatory reform should be appropriate, representative, responsive and proportional; and
 ▪ the cost of change is ultimately borne by the policyholder. The administrative burden of the proposed changes will be significant, and the impact of further regulatory reform should be taken into account.
 AMICE’s Secretary General, Sarah Goddard, commented:
 “Historically, AMICE has been deeply involved in the consultation around the development of Solvency II, particularly the implementation of the proportionality principle. Proportionality is particularly important for the mutual and co-operative insurance sector, alongside more technical aspects such as long-term equity, the volatility adjustment and interest rate risk. We have highlighted these issues in our response to the Solvency II 2020 Review consultation.” She continued, “This review is an important programme in ensuring that the European regulatory system works the way it should do, including fair treatment of all insurers, and AMICE has worked with members across Europe to ensure they are fully represented and their views appropriately reflected in our response. We look forward to a positive and ongoing dialogue with EIOPA and other stakeholders on regulatory reform.”

Wednesday, 18 December 2019

EIOPA publishes the results of the 2019 Occupational Pensions Stress Test

 The European Insurance and Occupational Pensions Authority (EIOPA) published the results of its 2019 Institutions for Occupational Retirement Provisions (IORPs) Stress Test. This is a crucial, biennial exercise to assess the resilience and potential vulnerabilities of the European Defined Benefit (DB) and Defined Contribution (DC) pension sector, tailored to the specificities of the diverse European pension sector and its potential impact on financial stability. For the first time, this European stress test exercise covered the analysis of Environmental, Social and Governance (ESG) factors for IORPs.
In its 2019 exercise, EIOPA applied an adverse market scenario, characterised by a sudden reassessment of risk premia and shocks to interest rates on short maturities, resulting in increased yields and widening of credit spreads. That adverse market scenario was applied to the end-2018 'baseline' balance sheet of a representative sample of European Economic Area (EEA) IORPs. In the baseline, those IORPs were underfunded by EUR 41 billion on aggregate, which translates into 4% of their liabilities, according to the common methodology.
The adverse market scenario would have led to substantial aggregate shortfalls of EUR 180 billion according to national methodologies and EUR 216 billion following the stress test's common methodology. Under the assumptions of the common methodology, the shortfalls in the adverse scenario would have triggered aggregate benefit reductions of EUR 173 billion and sponsoring undertakings would have to provide financial support of EUR 49 billion. In the 2019 exercise, EIOPA employed an extended cash flow analysis, which provided important insights into the stress effects in terms of timing: IORPs' financial situation would be heavily affected in the short term, leading to substantial strains on sponsoring undertakings within a few years after the shock and resulting in potential long-term effects on the retirement income of members and beneficiaries over decades (should the short-term effects become permanent).
Assessing the potential conjoint investment behaviours of IORPs after the stress event, EIOPA observed an expected tendency to re-balance to pre-stress investment allocations within 12 months after the shock. That may indicate counter-cyclical aspects of the expected investment behaviour, yet would also come at a risk.
The majority of IORPs in the sample indicated having taken appropriate steps to identify sustainability factors and ESG risks for their investment decisions, which is important for an effective implementation of the IORP II Directive, yet only 30% of them have processes in place to manage ESG risks. Further, only 19% of the IORPs in the sample assess the impact of ESG factors on investments' risk and returns. The preparedness of IORPs to integrate sustainability factors is widely dispersed and seems correlated to how advanced national frameworks were.
Matching the participating IORPs' investment information with Eurostat's greenhouse gas emission statistics by business sectors, indicates a relatively high carbon footprint, compared to the average EU economy, of the equity investments and, concentrated in a few Member States, of the debt investments.
In total, 19 countries participated in the exercise, covering more than 60% of the national DB and 50% of the national DC sectors in terms of assets – in most countries. In total 176 IORPs participated, thereof 99 DB IORPs and 77 DC IORPs.
EIOPA will follow-up on the findings and analyse in more depth the investment behaviour of IORPs, in particular in the persistently ultra-low and negative interest rate environment. To do so, EIOPA will make use of the significantly improved pension reporting from 2020. Going forward, EIOPA wants to further improve its analytical tool set for stress testing IORPs, extending the horizontal approach and with that assessing the common exposures and vulnerabilities of the DB and DC sectors together. 
Gabriel Bernardino, Chairman of EIOPA, said: 'Long-term obligations and long investment horizons arguably require IORPs to consider ESG factors and enable IORPs to sustain short-term volatility and market downturns for longer periods than other financial institutions.
The supervisory monitoring and the applied supervisory tools need to be capable of detecting adverse market trends and market developments that can have long-term negative effects.'
For more information, visit the dedicated webpage or read the factsheet.

Thursday, 5 December 2019

EIOPA publicly consults on its approaches for regulating key aspects of the Pan-European Personal Pension Product (PEPP)

The European Insurance and Occupational Pensions Authority (EIOPA) launched the public consultation of its approach to the regulatory and implementing standards, and technical advice to the European Commission on delegated acts, as mandated by the Pan-European Personal Pension Product (PEPP) Regulation.
The Consultation Paper sets out EIOPA's current stances to approach the regulation of key aspects of the PEPP, underpinning the idea of establishing a simple, safe and cost-efficient savings product.
In developing its proposals, EIOPA sought input from the supervisory community of the insurance and pension sectors, the other European Supervisory Authorities, and conducted an active dialogue with EIOPA's stakeholder groups and the Expert Practitioner Panel on PEPP.
The resulting key considerations are:
  • PEPP information documents: pre-contractual and annual information on the PEPP and its investment options have to be highly standardised to allow for comparability between PEPPs and for the consumer to track the performance of the chosen PEPP. The information needs to be relevant and tailored to the pension objective of the PEPP. The proposals are built on the experience with packaged retail investment and insurance-based products (PRIIPs) and the Directive on the activities and supervision of institutions for occupational retirement provision (IORP II), yet tailored to the specificities of PEPP, in particular its long-term nature, whilst making the PEPP ready for digitalisation.
  • Cost cap of the Basic PEPP: the cost-efficiency of the Basic PEPP is enforced by the introduction of a cost cap. In line with the PEPP's policy objective, an 'all inclusive' approach is suggested, while ensuring a level playing field amongst providers offering different features and in particular a guarantee on the capital invested.
  • Risk-mitigation techniques: it is necessary to set out the principle objectives for the risk-mitigation techniques to foster investment strategies leading to better pension outcomes. Clear and auditable criteria are needed to ensure the effectiveness of the chosen risk-mitigation technique.
  • Supervisory Reporting and cooperation between NCAs and EIOPA: enabling an efficient functioning of the PEPP market requires close monitoring and effective product supervision both from a home and host perspective - which is only possible with regular information exchange on PEPP business.
  • EIOPA's product intervention powers: relevant criteria, tailored to the PEPP, have been developed, building on past experience with product intervention powers at the level of the ESAs.
Stakeholder feedback is necessary to further develop the proposals and to ensure that the regulation delivers on the promise of the PEPP as an effective tool to complement pension savings in Europe.
The consultation ends on 02 March 2020.
Gabriel Bernardino, Chairman of EIOPA, said: 'The current macro-economic environment with persistent low and negative yields requires the rethinking of long-term retirement savings solutions. The implementation of the PEPP Regulation is an opportunity to build an appropriate regulatory basis for the design and monitoring of innovative and cost‑effective products that could enable European savers to reap the benefits of sustainable growth.

EIOPA invites all stakeholders to contribute to this consultation in order to ensure that the PEPP will be a success for the benefit of European citizens.'

Monday, 7 October 2019

EU insurers call for flexibility on implementation timeline for EIOPA cloud outsourcing guidelines

European insurers say they will likely need additional time to implement proposed guidelines on outsourcing to cloud service providers, which the European Insurance and Occupational Pensions Authority (EIOPA) is currently developing. Based on past industry experience, this will be necessary to facilitate a smooth transition from current operational practices.
Insurance Europe said that the guidelines should be limited to instances of material outsourcing: ie, outsourcing that encompasses critical and important operational functions or activities only to ensure legal certainty and consistency with Solvency II. Non-material outsourcing to the cloud should fall outside of their scope.
Cloud services should only be regarded as outsourcing if there are certain risks associated with cloud services that may have a material impact on either the insurer’s ability to comply with regulatory requirements or its customers. Insurance Europe added that clear definitions are necessary to ensure that the scope of application is sufficiently precise.
In the context of access and audit rights, Insurance Europe called on EIOPA to encourage and allow greater reliance on the use of third-party certification.

Saturday, 11 May 2019

EIOPA reviews the use of Big Data Analytics in motor and health insurance

The European Insurance and Occupational Pensions Authority (EIOPA) published its report on Big Data Analytics in motor and health insurance.
Data processing has historically been at the very core of the business of insurance undertakings, which is rooted strongly in data-led statistical analysis. Data has always been collected and processed to inform underwriting decisions, price policies, settle claims and prevent fraud. There has long been a pursuit of more granular datasets and predictive models, such that the relevance of Big Data Analytics for the sector is no surprise.

For further details please refer to the press releasefact sheet and the report.

Sunday, 7 April 2019

EIOPA welcomes the adoption of the Regulation introducing a Pan-European Personal Pension Product

The European Insurance and Occupational Pensions Authority (EIOPA) welcomed adoption by the European Parliament of the Regulation introducing a Pan-European Pension Product, the PEPP.

Gabriel Bernardino, Chairman of EIOPA said: "This Regulation is an important first step towards giving European citizens an alternative sustainable product to help closing the retirement savings gap. EIOPA, together with the national competent authorities, will ensure timely implementation and consistent application across the European Union. "

Friday, 14 December 2018

EIOPA announces results of the 2018 Insurance Stress Test

The European Insurance and Occupational Pensions Authority (EIOPA) published today the results of its 2018 and fourth Stress Test for the European insurance sector. This year's exercise assessed the participating insurers' resilience to the following three severe but plausible scenarios:

  • A yield curve up shock combined with lapse and provisions deficiency shocks, which means there is a sudden and sizeable repricing of risk premia and a significant increase in claims inflation.
  • A yield curve down shock combined with longevity stress, which means there is a protracted period of extremely low interest rates accompanied by an increase in the life expectancy.
  • A series of natural catastrophes where European countries are hit in a quick succession of four windstorms, two floods and two earthquakes.
In this year's exercise 42 European (re)insurance groups participated representing a market coverage of around 75 % based on total consolidate assets. The reference date was 31 December 2017.
The impact of the different scenarios on the balance sheet position and on the capital position of the participating groups was assessed by the excess of Assets over Liabilities and an estimation of the post-stress Solvency Capital Requirement (SCR) ratio. Given the operational and methodological challenges related to the recalculation of the group SCR, participating groups were allowed to use approximations and simplifications as long as a fair reflection of the direction and magnitude of the impact was warranted.
In the pre-stress (baseline) situation, participants reported an aggregate Assets over Liabilities (AoL) ratio of 109.5 % and a pre-stress SCR coverage of 202.4 %.
Overall, the exercise confirmed the significant sensitivity to market shocks combined with specific shocks relevant for the European insurance sector. On aggregate, the sector is adequately capitalised to absorb the prescribed shocks.
In the 'yield curve up' scenario, the excess of assets over liabilities is reduced by approximately one third (-32.2 %) and the aggregate post-stress SCR ratio drops to 145.2 %. Six groups reported a post-stress SCR ratio below 100 %.
In the 'yield curve down' scenario, the impact on the excess of assets over liabilities is of similar magnitude (-27.6 %) with an aggregate post-stress SCR ratio of 137.4 %.  Seven groups reported a post-stress SCR ratio below 100 %.
In the natural catastrophe scenario only a small decrease of 0.3 percentage points of assets over liabilities ratio was reported. Overall, the participating groups demonstrate a high resilience to the series of natural catastrophes tested, showing the importance of the risk transfer mechanisms in place, namely reinsurance, which absorbed 55 % of the losses. Consequently, the most affected groups are reinsurers and those direct insurers largely involved in reinsurance activities.
One of the objectives of this year's exercise, in line with the recent recommendations from the European Court of Auditors, was to increase transparency by requesting the voluntary disclosure of a list of individual stress test indicators by the participating groups. To date, four of the 42 participating groups provided consent to the publication of the individual results.
Gabriel Bernardino, Chairman of EIOPA said: "This stress test marks an important step forward in assessing the resilience of the European insurance sector to a set of adverse but plausible scenarios and provides a valuable basis for a continuous dialogue with the participating groups on the identified vulnerabilities and the preventive measures and potential management actions to address them, should they materialise."

Friday, 30 November 2018

EIOPA consults on the integration of sustainability risks and factors

European Insurance and Occupational Pensions Authority (EIOPA) published for consultation its draft technical advice on possible amendments to the delegated acts under Solvency II and the Insurance Distribution Directive (IDD) concerning the integration of sustainability risks and factors.
The proposed draft amendments to the Solvency II Delegated Regulation are aimed to ensure identification and assessment of sustainability risks in the areas of underwriting and investments. Insurance undertakings shall take into account the potential long-term impact of investment decisions on sustainability factors (stewardship principle) and where relevant reflect policyholders' Environmental, Social and Governance (ESG) preferences.
The proposed draft amendments under the IDD relate to the following two areas:
  • Conflicts of interest: When identifying the types of conflicts of interest which might damage the interests of a customer, insurance undertakings and insurance intermediaries should include those that potentially may arise in relation to sustainability. Insurance undertakings and insurance intermediaries should have in place appropriate arrangements to ensure that ESG considerations are included in the advisory process and do not lead to mis-selling practices.
  • Product Oversight & Governance: Customers' ESG preferences in the target market shall be considered in various stages of product lifecycle in case the insurance product is offered to customers seeking insurance products with an ESG profile.
On 1 August 2018, EIOPA received a request from the European Commission to provide technical advice on potential amendments to or introduction of delegated acts under the Solvency II Directive and IDD with regard to the integration of sustainability risks and sustainability factors. This Call for Advice refers particularly to the following areas:
  • Organisational requirements
  • Operating conditions
  • Risk management
  • Target market assessment for the IDD only
EIOPA is seeking stakeholders comments on the draft technical advice developed on the basis of the following three principles:
  • Coherence with current requirements
  • Proportionality
  • Cross-sectoral consistency
The draft technical advice can be obtained via EIOPA's Website.
Stakeholders are invited to provide their comments by Wednesday, 30 January 2019 responding to the survey questions accessible via this link.

Friday, 16 November 2018

EIOPA assesses supervisory practices and application of key functions through peer review

  • This peer review assessed how National Competent Authorities (NCAs) supervise and determine the application of the key functions by the insurer with particular emphasis on proportionality
  • In general NCAs apply the principle of proportionality
  • Some weaknesses exist, leading to recommended actions to 18 NCAs in 8 different areas of supervisory approaches
  • For the first time, the findings are published on a named basis
European Insurance and Occupational Pensions Authority (EIOPA) published the findings of its  peer review assessing how National Competent Authorities (NCAs) supervise and determine whether an insurer's set­ting of key functions fulfils the legal requirements of Solvency II with a particular emphasis on proportionality.
The review examines practices regarding:
  • combining key functions under one holder;
  • combining key functions with administrative, management or supervisory body (AMSB) member­ship or with carrying out operational tasks;
  • subordination of one key function under another key function;
  • split of one key function among several holders;
  • assessment of the fitness of key function holders; and
  • outsourcing of key functions.
Key functions (risk management, actuarial, compliance and internal audit) are an essential part of a good system of governance under Solvency II, and, are expected to be operationally independent to ensure effective internal control. Given that the implementation of the governance requirements should reflect the natural scale of complexity of the risks run by the insurers, NCAs should apply the principle of proportionality in relation to the compliance with key function holder requirements.
The report includes findings from a comparative analysis of the key functions, identifies best practices and presents an overview of recommended actions addressed to the NCAs and EIOPA.
Overall, NCAs have adopted similar approaches in assessing how insurers manage key functions and applied the principle of proportionality in their assessment. Four best practices have been identified, providing guidance to NCAs for a more systematic approach regarding the principle of proportionality as well as for ensuring consistent and effective supervisory approaches.
The report also identifies some weaknesses, resulting in a number of recommended actions issued to NCAs. Some NCAs had not yet assessed key functions according to the Solvency II requirements. Other NCAs had weaknesses, in particular regarding the depth assessment and mitigating measures demanded from insurers for example in cases where combinations exist. The areas of recommended actions are linked with the supervisory approach of NCAs, the different combinations of key function holders including the internal audit function and AMSB membership as well as the fitness of the key function holders and outsourcing. 
In line with the recently updated methodology, for the first time, the peer review findings are published in full and on a named basis.
As a result of this peer review, many NCAs have already undertaken actions to improve supervisory practices. These improvements will be taken into consideration in the follow-up to this review.
Gabriel Bernardino, Chairman of EIOPA, said: "The results of this peer review demonstrate the effective approach of national competent authorities in applying the principle of proportionality in their assessment of key functions. Through the implementation of the recommended actions consistent approaches among supervisory authorities will be further enhanced. I particularly welcome the increased transparency through the publication of the findings on a named basis. In being open about their activities, including where improvements can be made, the supervisory community is strengthening the foundations of supervisory convergence."
A shorter Executive Summary, the full report and the methodology applied in the conduct of the peer review can be obtained via EIOPA's Website.

Thursday, 15 November 2018

Joint Statement: EU and U.S. insurance regulators continue the dialogue on cyber security, cyber insurance, the use of big data and intra-group transactions

  • Growing cyber threats, increasing power of big data as well as contagion risk from intra-group transactions in multi-national insurance groups are focus areas for risk-based and forward-looking supervision in the United States and the European Union
  • The Steering Committee of the EU -U.S. Insurance Dialogue Project set the scene for 2019 for further deepening the cooperation and mutual understanding of regulatory approaches and supervisory practices in these evolving and critical areas
  • The recent EU -U.S. Forum served as an important platform to share multiple perspectives on objectives, opportunities, challenges and risks in these key areas. 
Frankfurt, 14 November 2018 – On 10 November 2018, the European Insurance and Occupational Pensions Authority (EIOPA) together with the National Association of Insurance Commissioners (NAIC) and the Federal Insurance Office (FIO) of the U.S. Department of Treasury hosted the sixth EU- U.S. Forum in Luxembourg. Representatives from the industry, consumer organisations and regulators from the United States and the European Union discussed challenges and opportunities related to cyber risks, the use of big data, artificial intelligence and intra-group transactions in multi-national insurance groups.
Gabriel Bernardino, Chairman of EIOPA, said: "We particularly welcome cooperation with our American colleagues, building on successful past dialogue and now benefiting from deepening the mutual understanding of supervisory approaches and practices to address fast evolving cyber risks, increasing power of big data and the critical area of intra-group transactions. Considering the implications for the operational environment and the business models of insurers, globally, a collective response of supervisors is required to meet our primary objective which is the protection of policyholders and beneficiaries."
Katharine L. Wade, Commissioner, Connecticut Insurance Department, said: "The EU- U.S. Insurance Dialogue Project has led to an enhanced mutual understanding of our respective regulatory frameworks and initiatives in the areas of cyber security, cyber insurance, use of big data and intra-group transactions. Continued dialogue with our European colleagues in these key areas helps to ensure effective coordinated supervision of cross border insurance groups for the benefit of our policyholders."

Sunday, 5 August 2018

Deeper understanding of cyber risk needed – A core challenge for the European Insurance Industry

European Insurance and Occupational Pensions Authority (EIOPA) published its report "Understanding Cyber Insurance - A Structured Dialogue with Insurance Companies" (EIOPA Understanding cyber insurance).
Cyber risk is a growing concern for in­stitutions, individuals, and financial mar­kets. In less than five years, it has surged to the top positions in the list of global risks for business. The increasing number of cyber incidents, the continued digital transfor­mation and new regulatory initiatives in the European Union are expected to raise awareness and to boost the demand for cyber insurance.
With the stand-alone cyber insurance market located predominately in the United States and only a fraction of the total market in Eu­rope, available reports and surveys focus on the global or the US insurance market. So far, very little attention has been paid to the European market. One of the key findings of the report confirms this fact, namely the need for a deeper under­standing of cyber risk, which is a core chal­lenge for the European insurance industry. This challenge generates or fosters other challenges, such as improper treatment of non-affirmative risks and difficulties to quantify risks, among others.
The outcome of this structured dialogue with the industry provides useful insights on the functioning, growth potential, challenges and risks of cyber insurance in Europe in the context of the expected growing importance of cyber insurance in the portfolios of (re)insurers. Although based on a limited sample, the report addresses important key findings, such as the clear need for improved understanding of cyber risk. This report is the first attempt by EIOPA to enhance the level of understanding of cyber risk underwriting with a focus on the European insurance market. Further work in this field is necessary. Therefore, EIOPA included a combination of qualitative and quantitative questions on cyber risk in its 2018 Insurance Stress Test.

Wednesday, 18 July 2018

EIOPA examines causes of insurers’ failures and near misses

Today, the European Insurance and Occupational Pensions Authority (EIOPA) published a report on "Failures and near misses in insurance: Overview of the causes and early identification" to enhance the understanding of the causes of insurers' failures and near misses.
The financial crisis put a substantial amount of insurance undertakings and groups under severe financial distress. Although the majority of troubled in­stitutions were banks, several insurers were also affected. Among other rea­sons, this was attributable to inappro­priate investment decisions by insur­ers, which led to significant losses, the interconnectedness with banks or, in general, evidence of poor governance.
This report is the first of a series aimed at enhancing supervisory knowledge of the prevention and management of insurance failures.  The findings are based on information contained in EIOPA's database of failures and near misses. The database was commenced in 2014, covering the period from 1999 to 2016 and gathering sample data of 180 affected insurance undertakings in 31 European countries.
In the first part of the report the framework underlying the concepts of "failure" and "near miss" and the construction process of EIOPA's database are explained, followed by an overview of the stylised facts and statistics. The focus of the report is, however, the examination of the causes of failure in insurance, as well as the assessment of the reported early identification signals.
The report is available via EIOPA's Website.

EIOPA launches EU-wide thematic review on consumer protection issues in travel insurance

European Union-wide thematic review seeks to identify:
 Potential sources of consumer detriment in travel insurance
 How new business models, in particular, in distribution, impact consumers and the travel insurance industry
 Possible supervisory and regulatory actions needed to ensure consumer protection
 Best practices to provide guidance to insurance undertakings in implementing national provisions of the Insurance Distribution Directive (IDD) for the distribution of travel insurance as well as other types of insurance products

European Insurance and Occupational Pensions Authority (EIOPA) launched a thematic review on consumer protection issues in travel insurance. The purpose of the review is to identify consumer protection issues in travel insurance and possible actions to ensure better consumer protection.

Through the review, EIOPA will assess potential sources of consumer detriment stemming from how travel insurance products are designed, distributed and sold within the European Union. In particular, EIOPA will consider the impact of emerging distribution and business models on consumers and, more broadly, on the insurance industry.
Where the impact results in consumer detriment, EIOPA intends to identify the steps needed to ensure that consumers are treated fairly. Given that travel insurance is frequently sold through cross -selling as an ancillary product, EIOPA will pay special attention to these distribution practices.
The aim is to identify best practices to provide guidance to insurance undertakings in implementing  national provisions of the Insurance Distribution Directive (IDD) for the distribution of travel insurance as well as other types of insurance products.
The thematic review will be conducted in close cooperation with national competent authorities (NCAs) that will identify and gather data from participating insurance companies. EIOPA plans to publish the key findings from the review in the first quarter of 2019.
Gabriel Bernardino, Chairman of EIOPA, said: “Travel insurance has too often been under the spotlight with the persistent appearance of a number of consumer protection issues. This review will enable us to gain a deeper understanding of the reasons leading to potential consumer detriment and to identify the required actions that will better protect consumers.” The questionnaire circulated by the NCAs to a representative sample of insurance undertakings can be viewed via EIOPA’s website.

Monday, 9 July 2018


A European Union-wide thematic review will
 analyse the potential benefits and risks of Big Data in motor and health insurance
 assess new business models and data quality issues arising from Big Data including implications for consumers
 enhance the understanding of new types and sources of data and data analytics tools used by insurance undertakings and intermediaries
  identify possible required supervisory and regulatory actions

Frankfurt, 06 July 2018 – Today, the European Insurance and Occupational Pensions Authority (EIOPA) launched a European Union-wide thematic review on Big Data as a follow-up to the European Supervisory Authorities’ cross-sectorial review of the use of Big Data published in March this year. The purpose of the thematic review is to gather empirical evidence on the use of Big Data by insurance undertakings and intermediaries along the whole insurance value chain, i.e. in pricing and underwriting, in product development, in claims management, as well as in sales and marketing. The review specifically focuses on the motor and health insurance markets. The review will analyse the potential benefits and risks arising from Big Data both for the industry and for consumers. In particular, it will assess new business models and data quality issues as well as impacts on financial inclusion and the fair treatment of consumers through consumer profiling techniques and more granular risk assesments.
The thematic review will collect information on new types and sources of data as well as the increasingly sophisticated data analytics tools used by insurance undertakings and intermediaries. The thematic review will be conducted in close cooperation with the National Competent Authorities (NCAs) aiming at a coverage of at least 60 % of the motor and health insurance markets in each Member State. The quantitative and qualitative input will be collected from the insurance industry, consumer associations and NCAs. EIOPA will collect the data in the course of July and August this year and plans to publish the key findings in the first quarter of 2019. Gabriel Bernardino, Chairman of EIOPA said: “Big Data has the potential to bring many benefits, both for the industry and for consumers. At the same time, also new challenges and risks are arising. In the interest of the European consumers, evidence about the implications of Big Data is needed. This review will provide a thorough analysis of the impact of Big Data on consumers and the insurance industry and determine possible required supervisory and regulatory actions.” The questionnaires that EIOPA is circulating to NCAs, consumer associations and a representative sample of insurance undertakings, can be viewed via EIOPA’s Website.

Monday, 25 June 2018

EIOPA publishes an expanded set of Solvency II statistics on the European insurance sector

 EIOPA published a new set of statistical information on the European insurance sector based on Solvency II regulatory reporting for the fourth quarter of 2017.
In addition to the regular statistics, for the first time EIOPA is publishing new exposure statistics on the European insurance sector. This new data contains:
-         Detailed statistics on types of exposure as well as location of exposure both  at    European Economic Area and individual country level
-          Clear asset classifications including government bonds, commercial bonds and equity
-          Real estate exposures with a distinction between commercial and residential exposures
-          Raw aggregated exposure data to enable more in-depth analysis by end-users
Starting with today's publication, the new exposure data will become a regular part of the EIOPA insurance statistics which can be accessed via EIOPA's website.

Tuesday, 15 May 2018


The aim is to assess vulnerabilities of the European insurance sector
 It is not a pass-or-fail exercise
  The stress scenarios encompass a combination of market and insurance specific risks as well as the exposure to cyber risk
  42 European insurance groups participate representing close to 78 % of the total European market coverage
 Increased transparency in the disclosure of the stress test results
 Frankfurt, 14 May 2018 – Today, the European Insurance and Occupational Pensions Authority (EIOPA) launched its fourth stress test for the European insurance sector. This regular exercise aims to assess insurers’ vulnerabilities. It is not a passor-fail-exercise. For each stress test, EIOPA tailors the scope and scenarios according to developments in market conditions and their potential negative implications for insurers. The 2018 scenarios encompass a combination of market and insurance specific risks, including a natural catastrophe scenario. The objectives of the fourth insurance stress test are:
 To assess vulnerabilities of the European insurance sector to specific adverse scenarios with potential negative implications for the European financial markets and the real economy
 To raise the awareness of the potential threats to financial stability posed by the insurance sector at the European level
 To increase transparency by requesting the voluntarily disclosure of individual results by participating groups This year’s exercise targets 42 European insurance groups. EIOPA, in coordination with the national competent authorities, selected the companies according to size, European Union-wide and local market coverage as well as relevance for financial stability. In total, the target sample represents approximately 78% European market coverage, based on total consolidated group assets according to Solvency II financial stability reporting.
The full list of the participating groups can be found here. The deadline for submission of results to the national competent authorities is 16 August 2018. EIOPA will regularly publish questions and answers addressing queries from the participating groups.
The publication of the stress test results is planned in January 2019. Gabriel Bernardino, Chairman of EIOPA, said: “The scenarios reflect severe but plausible external shocks including insurance specific shocks. Furthermore, for the first time the exposure to cyber risk and best practices in dealing with these risks is assessed.
This stress test will therefore provide further valuable insight to the resilience of the European insurance sector. The increased transparency is key to ensure a level playing field and enhance market discipline among the stress test participating groups.” 

Wednesday, 2 May 2018

Risk Dashboard for fourth quarter of 2017: Risk exposure of the European Union insurance sector remains stable

The results show that the risk exposure of the insurance sector in the European Union remained stable. Despite positive macroeconomic developments, low interest rates are still a major source of risk for European insurers. Credit and market risks continued at a medium level. Spreads further decreased and concerns about potential risk mispricing remained. Volatility of equity prices increased and valuations are now slightly lower. Median profitability levels were broadly the same as in the fourth quarter of 2016 and solvency positions continued to be strong for both groups and solo companies. The impact of the natural catastrophes from the third quarter kept insurance risks at a medium level. Market perceptions were mixed, with insurers' stock prices outperforming the market but at the same time there was a deterioration of the external rating outlook for some insurance groups.
Risk Dashboard based on fourth quarter of 2017 data.

Friday, 27 April 2018

EIOPA defines its supervisory convergence priorities

 The supervisory convergence plan focuses on the implementation of Solvency II and conduct of business supervision
 EIOPA defined three priority areas, namely the implementation of the common supervisory culture, addressing the risks to the internal market and to the level playing field which may lead to supervisory arbitrage as well as the supervision of emerging risks Frankfurt,

23 April 2018 – Today, the European Insurance and Occupational Pensions Authority (EIOPA) published its supervisory convergence plan for 2018-2019 for the insurance sector, focussing on the implementation of Solvency II and conduct of business supervision. Supervisory convergence should ensure a high, effective and consistent level of supervision throughout the European Union, granting a similar level of protection to all European policyholders and beneficiaries. To strengthen further supervisory convergence for 2018 and 2019, EIOPA defined the following three priority areas:
1. Implementation of the common supervisory culture and new supervisory tools 2. Risks to the internal market and the level playing field which may lead to supervisory arbitrage 3. Supervision of emerging risks
The implem entation of a common supervisory culture will include the further specification of each of the key characteristics of the common supervisory culture. In addition, EIOPA will develop common benchmarks for the supervision of internal models, work on a common basis for the supervisory assessment of conduct risks throughout a product’s life cycle, perform a thematic review on travel insurance and define good practices for the supervision of intra-group transactions and risks concentrations.
To address risks to the internal market and to the level playing field, EIOPA will analyse the consistency of the calculations of technical provisions in general and in a cross-border context in particular for non-life business such as the “decennial liability insurance” and “medical malpractice insurance”. Furthermore, special attention will be paid to the assessment of internal model outcomes, the detection of potential unsustainable cross-border business models and the establishment of specific collaboration platforms where needed.
In the area of supervision of emerging risks, EIOPA will develop good practices on the supervision of IT security and governance, including supervisory expectations on insurance undertakings’ practices on cyber security and explore efficient ways to perform a cyber-attack penetration test. A thematic review of the insurance industry’s use of big data as well as the monitoring of the potential consequences of the withdrawal of the United Kingdom from the European Union will continue to ensure consistency in supervisory approaches.
The priorities of the supervisory plan were identified according to their impact on policyholders and on financial stability as well as on the level playing field or the functioning of the internal market.
The priority areas include also those areas of supervision where practices across the European Union still differ substantially. At the beginning of 2019, the supervisory convergence plan will be updated and include a progress report. On conduct of business supervision, EIOPA has developed a broader strategy to address supervisory convergence from the conduct perspective.
The strategy underlines tools for improving market monitoring and risk identification and mitigation as well as developing proactive supervisory capacities across the European Union with the aim to tackle better potential consumer detriment. Gabriel Bernardino, Chairman of EIOPA, said: “Achieving supervisory convergence, one of EIOPA’s strategic goals, requires a collective effort by all national supervisory Page 3 of 3 authorities and EIOPA. This supervisory convergence plan sets key priority areas, which are crucial for achieving high-quality and effective supervision and the implementation of a common supervisory culture across the European Union in the interest of the policy holders.”

Friday, 20 April 2018

EIOPA’s cooperation platforms prove beneficial in addressing cross-border issues

During last year, EIOPA conducted a number of activities that contributed to high-quality effective supervision, as well as overseeing the level playing field and appropriate application of supervisory measures within the European Union. 
EIOPA detected a growing number of issues related to cross-border business activities provided through ‘freedom to provide services’. To enhance cooperation and communication between supervisory authorities in such situations, EIOPA rolled out cooperation platforms, a new and important tool that facilitates stronger and timely cooperation between national supervisors in the assessment of the impact of cross-border activities and identification of preventive measures. Benefits of cooperation platforms have been identified for both home and host supervisors. By the close of 2017, nine cooperation platforms were operational.
Furthermore, a wide range of tools such as balance sheet reviews, peer reviews, consistency projects on internal models, participation in meetings of colleges and bilateral engagements with national supervisory authorities continued to be used to enhance the supervisory capacity of national supervisors. For example, EIOPA oversaw a balance sheet review of the Bulgarian insurance sector and assets of its pension funds, issued three supervisory opinions, conducted two consistency projects and participated in 49 cross-border colleges and 14 colleges on internal models.
This year, in the field of oversight, EIOPA will pay specific attention to further implementation of prudential regulation, Solvency II, and conduct of business supervision. In particular, EIOPA will continue to focus on the close interaction with national supervisory authorities, improvements in supervisory practices in the authorisation process and supporting reviews of business models to detect those models posing material prudential or conduct risk.

Tuesday, 17 April 2018

EU financial regulators warn against risks for EU financial markets, Brexit, asset repricing and cyber-attacks key risks

The securities, banking and insurance sectors in the European Union (EU) face multiple risks, the latest report on risks and vulnerabilities by the Joint Committee of the European Supervisory Authorities (ESAs) shows. The ESA report for the second half of 2017 outlines the following risks as potential sources of instability:
  • sudden repricing of risk premia as witnessed by the recent spike in volatility and associated market corrections;
  • uncertainties around the terms of the UK's withdrawal from the EU; and
  • cyber-attacks. 
The ESA report also reiterates their warning to retail investors investing in virtual currencies and raises awareness for risks related to climate change and the transition to a lower-carbon economy.
In light of the ongoing risks and uncertainties, especially those around Brexit, supervisory vigilance and cooperation across all sectors remains key. Therefore, the ESAs advise the following policy actions by European and national competent authorities as well as financial institutions:
  • Against the backdrop of the potential for sudden risk premia reversals, supervisory stress testing remains a crucial tool for the management of systemic risk – these tests are to ensure that systemically relevant sectors and players are safe to withstand market shocks, such as insurance and occupational pensions sectors, central counterparties (CCP), banks and in the future asset managers;
  • Brexit: the ESAs recommend EU financial institutions and their counterparties, as well as investors and retail consumers, to consider timely mitigation actions to prepare for the UK's withdrawal from the EU – including possible relocations and actions to address contract continuity risks;
  • Cyber security: the ESAs encourage financial institutions to improve fragile IT systems, explore inherent risks to information security, connectivity and outsourcing. To support this, the ESAs will continue addressing cyber risks for securities, banking and insurance markets and monitor firms' use of cloud computing and potential build-up of cyber risks; and 
  • Climate change: the ESAs recommend financial institutions to consider sustainability risk in their governance and risk management frameworks and to develop responsible, sustainable financial products – moreover, supervisors should enhance their analysis of potential risks related to climate change for the financial sector and financial stability.