European Insurance: Solvency II (12 December 2016)

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EU / European Parliament / EIOPA, Investments, Life insurance, Non-Life, PRA / Bank of England, Solvency II

12 December 2016

Selected recent Solvency II news items: 

On 8 December, EIOPA published a Discussion Paper on the review of the Solvency Capital Requirement (SCR) standard formula. This is the first phase of the Solvency II review, as defined in the Delegated Regulation, which should be done by the EC before December 2018. The Solvency II regime will be reviewed by 2021. The Chairman of EIOPA said: “EIOPA is particularly interested in concrete proposals to achieve the objective of more simplicity and proportionality whilst reflecting risk-sensitivity of the system and avoiding pro-cyclicality”. Given the concerns around the low interest rate environment it is interesting to note: "Therefore EIOPA concludes that the current design of the interest rate risk submodule [underestimates the risk and] needs to be amended to properly reflect the risks." The questions to stakeholders include a review of the risk margin calculation and potential simplifications for the catastrophe risk and counterparty default risk modules and the application of the look-through approach (the call for advice focuses on those investments which are backing unit-linked and index-linked products). The consultation period ends on 3 March 2017.

On 6 December, ​EIOPA published the "Taxonomy 2017 Roadmap​". (Broadly speaking, the taxonomy is the process by which NCAs pass supervisory data to EIOPA.) This is of primary importance for software developers responsible for reporting solutions. However, more generally, it is useful to know that "As a general rule EIOPA plans one taxonomy release per year and aims to minimise the number of taxonomy publications and it is expected that in regular years (most of the years) only one release will occur." Firms are expected to have 6-9 months to prepare to use any new release. The next version is provisionally scheduled for release at end July 2017 and will be used for 2017 Q4 and end 2017 annual submissions.

The PRA has now published a note of the Solvency II Regulatory Reporting Industry Working Group held on 27 September. The note contains feedback on industry-wide Q1 and Q2 submissions and provides high level information on asset and investment framework and PRA's work to analyse and cleanse data. Since the meeting was held, the PRA published CP 40/16 which supersedes the earlier consultation on NSTs. 

David Gray

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David Gray
Consultant Actuary

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