The consultation launched on 26 October 2020 by the European Commission asks how the EU can best go about helping businesses in the way they operate, towards a transformation to a more sustainable economy and to ensure that environmental and social interests are embedded in business strategies. The European Commission communicated in December 2019 its Green Deal action plan. One of its ambitions is to mainstream sustainability in all EU policies. Because it considers the private sector as key to financing the transition, it set out a number of actions: one is to strengthen the foundation for sustainable investment. This means also to further embed sustainability into the corporate governance framework, “as many companies still focus too much on short-term financial performance compared to their long-term development and sustainability aspects”. Other actions are the review of the Non-Financial Reporting Directive and supporting “businesses and other stakeholders in developing standardised natural capital accounting practices within the EU and internationally.”  Continue reading…

EIOPA has recently issued several statements. For the attentive reader, there is a difference when such a statement is called a supervisory statement or simply a statement. Surprised? So, what’s in a name? Let us first focus on Supervisory Statements. EIOPA issued in 2017 its first Supervisory Statement. EIOPA defines on its website today Supervisory Statements as follows: “Supervisory Statements often aim to present finding on current practices observed and indicate areas for improvement. The statements are directed to National Supervisory Authorities (NSAs) as well as insurance and reinsurance undertakings.” Continue reading…

The Commission has started its public consultation on the review of the Solvency II framework directive (SII FD). The consultation period will run till 21 October 2020. Apart from the SII FD, the scope of the review may extend to the SII Delegated and Implementing Regulations as appropriate. Normally, would it not have been for the pandemic crisis, EIOPA would already have delivered its technical advice requested by the Commission as the due date for that advice was 30 June 2020 (see formal request for technical advice sent to EIOPA 11 February 2019). However, on 8 May 2020, EIOPA, in close coordination with the European Commission, decided to delay its advice and holistic impact assessment to deliver it at end December 2020. This will allow EIOPA to take into account the importance of assessing the impact of the current Covid-19 situation on the SII Review. But this also moves the calendar with 6 months. The Commission is also concurrently consulting on its Inception Impact Assessment. The roadmap is open for feedback for 8 weeks and runs till 26 August 2020. The Commission will summarise the input received in a synopsis report explaining how the input will be taken on board and, if applicable, why certain suggestions can’t be taken up. In that roadmap, the Commission foresees a new legislative proposal by Q3 2021.  Continue reading…

On 23 June 2020, the UK Chancellor of the Exchequer gave a written statement in which he announced plans on the update of prudential requirements in several areas of the financial sector. Regarding Solvency II, the Chancellor made it clear that the UK will review certain features of the regime. Rishi Sunak mentioned the risk margin, the matching adjustment, the operation of internal models and the reporting requirement for insurers. The statement added that this list was not limited. It should be noted that, after all, Solvency II was very much inspired by the UK’s prudential regime. The list of the items the European Commission plans to consider in its first major Solvency II review exercise is much longer and overlaps gently with the hitherto limited list of the British Chancellor, eager “to take back control of the rules governing our world-leading financial services sector”. In a recent webinar, Didier Millerot, head of the Insurance and Pensions Unit of the European Commission mentioned as areas: the risk margin, the long term guarantee measures – the reason why the 2020 review after all was planned in the Omnibus II amendments of 2014 – and proportionality. But he also mentioned many other points such as the recovery and resolution process, a minimum level of national insurance guarantee schemes’ harmonisation, cross-border supervisory quality and supervisory cooperation – important in a cross-border freedom of services situation for the reputation of the Single Market -, green assets and the contribution of the insurance sector to the new sustainable economy. Nobody can be jealous of such a long list of items on which the Commission will have to ponder carefully whether to propose amendments and how.  Continue reading…

by Lieve Lowet

This is the second part in a series of three articles written by me, which focuses on the Covid-19 pandemic risk. Today, examining the Solvency II framework, pandemic risk is a submodule considered in the health catastrophe risk module, consisting of a mass accident risk submodule, an accident concentration risk submodule, the latter including worker’s compensation insurance, and a pandemic risk submodule (Art 160-163, DEA). According to Article 163 of the Solvency II delegated regulation, the pandemic risk submodule covers the medical expense pandemic exposure and the income protection pandemic exposure but not workers compensation insurance. Annex XVI includes the different factors to be used in that module, such as the ratio of insured persons with clinical symptoms, which are hospitalised (1%), consult a medical practitioner (20%) or seek no formal medical care (79%).  Continue reading…

by Lieve Lowet

This blog is the first of a series of three articles written by me concerning the Covid-19 pandemic and Solvency II. The articles will be published on three consecutive days. As could have been expected, once the first implications of the Covid-19 pandemic started to unfold, EIOPA informed the European Commission that it would not deliver its expected advice and its holistic impact assessment on the combined impact of the draft advice for the review of Solvency II by the end of June 2020, but rather by the end of December 2020, six months later than planned. Continue reading…