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Solvency II Directive
application of the principle of proportionality to ensure o ESAs Advice on Information and Communication
consistent supervision. Furthermore, EIOPA is of the view Technology risk management in the EU financial sector
that at this point there is no clear need for special P2P In April 2019, the ESAs published a Joint Advice on the need
insurance regulation, but this might be the case in the future, for legislative improvements relating to ICT risk management
if P2P insurance evolves. requirements in the EU financial sector.
At a later stage, EIOPA’s work will also include: In developing the Joint Advice, the ESAs’ objective was that
- Convergence on supervision of algorithms; every relevant entity should be subject to clear general
- (Re) insurance value chain and new business requirements on governance of ICT, including cybersecurity,
models arising from InsurTech; to ensure the safe provision of regulated services. Guided
- Innovation Hub; by this objective, the proposals presented in the Advice
- RegTech; and aim at promoting stronger operational resilience and
- Distributed ledger technology (DLT) / Blockchain. harmonisation in the EU financial sector by applying changes
to their respective sectoral legislation. Incident reporting
is highly relevant to ICT risk management and allows
relevant entities and authorities to log, monitor, analyse and
respond to ICT operational, ICT security and fraud incidents.
Therefore, the ESAs call for streamlining aspects of the
incident reporting frameworks across the financial sector.
Furthermore, the ESAs suggest that a legislative solution for
an appropriate oversight framework to monitor the activities
of critical third-party service providers should be considered.
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The Solvency II Directive introduced a new solvency view of the impact of the pandemic on the financial mar-
regime that has applied since 1 January 2016 to about kets and insurance business and to take that impact into
5000 (re)insurance undertakings in the European Eco- account in EIOPA’s advice. The new timing strikes a bal-
nomic Area (EEA). ance between the need to use the opportunity of review-
ing the Solvency II directive and the need for the advice to
The Solvency II Directive introduces a three-pillar approach reflect recent developments.”
whereby:
The Commission seeks EIOPA’s advice on the above-men-
• Pillar One contains the quantitative requirements tioned areas and also on the two following items that are
(capital, valuation in the Solvency balance sheet, own of interest to insurance intermediaries:
funds),
• Pillar Two contains the qualitative requirements (gov- 1. Insurance Guarantee Schemes (IGS); the Commis-
ernance, including risk management and the supervi- sion asks EIOPA to provide advice on whether there
sory review process) and is a need for minimum harmonisation rules (role and
• Pillar Three: contains the transparency requirements functioning of IGSs, geographic coverage, cross-bor-
(supervisory reporting and public disclosure) der coordination mechanisms, eligible policies, eligi-
ble claimants, funding). In the context of FOS/FOE, the
The Solvency II Directive provides that certain areas must Commission asks EIOPA whether harmonised rules
be reviewed by the Commission in 2020, namely: on IGSs would enable a recourse to IGS of the home
Member State, in order to protect policyholders in the
• long term guarantees measures and measures on other Member States where the undertaking is oper-
equity risk (Article 77f); ating (see article on ESAs and BIPAR).
• methods, assumptions and standard parameters 2. FOS/FOE; the Commission asks EIOPA to provide
used when calculating the Solvency Capital Require- advice on whether the current supervisory powers
ment standard formula (Article 113(3)); of national supervisory authorities and of EIOPA are
• Member States’ rules and supervisory authorities’ sufficient to prevent failures of insurance companies
practices regarding the calculation of the Minimum operating cross-border
Capital Requirement (Article 129);
• group supervision and capital management within a
group of insurance or reinsurance undertakings (Arti- In its response submitted to EIOPA in January 2020, BIPAR
cle 242(2)). focuses mainly on EIOPA draft technical advice on the
supervision of cross border activities of insurers, recov-
Beyond that minimum scope, other parts of the Solvency ery and resolution, reporting and disclosure (group SFCR
II framework have been identified by the Commission etc…). BIPAR supports EIOPA proposal of a compulsory
services or by stakeholders as deserving a reassessment, exchange of information between national supervisory
such as the supervision of cross-border activities or the authorities (home and host) in the context of cross bor-
enhancement of proportionality principles, including as der activities of insurers. In the context of this exchange
regards reporting, and also others. of information, EIOPA refers to the authorisation of inter-
mediaries – which is confusing as they are not authorised
In February 2019, the European Commission requested under Solvency II but under the IDD– EIOPA does not
EIOPA to provide a Technical Advice on the review of the explain its proposal. BIPAR opposes this proposal. EIOPA
Solvency II Directive by 30 June 2020. However, on 8th proposes some modifications to the SFCR which BIPAR
May 2020, EIOPA, in close coordination with the European does not support.
Commission, decided to deliver its advice to the European
Commission at end December 2020, to take into account
the importance of assessing the impact of the current Cov-
id-19 situation on the Solvency II Review.“ The new timing
will allow an update of the holistic impact assessment in
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