Ireland: Insurance Quarterly Legislative Update 1 Jan 2017 - 31 March 2017

Last Updated: 20 April 2017
Article by Dillon Eustace

Most Read Contributor in Ireland, July 2017


Solvency II

(i) EIOPA publishes monthly symmetric adjustment of the equity capital charge

On a monthly basis, EIOPA updates information on the symmetric adjustment of the equity capital charge. The symmetric adjustment to the equity capital charge shall be included in the calculation of the equity risk sub-module in accordance with the Solvency Capital Requirement (the "SCR") standard formula to cover the risk arising from changes in the level of equity prices. This adjustment is regulated mainly in Article 106 of the Solvency II Directive (2009/138/EC); Article 172 of the Solvency II Delegated Act (2015/35/EU) as well as in the Implementing Technical Standards on the equity index for the symmetric adjustment of the equity capital charge (Commission Implementing Regulation 2015/2016/EU).

EIOPA published the technical information on the symmetric adjustment of the equity capital charge for Solvency II as follows:

  • With reference to the end of December 2016 on 9 January 2017;
  • With reference to the end of January 2017 on 7 February 2017; and
  • With reference to the end of February 2017 on 7 March 2017.

The monthly symmetric adjustment of the equity capital charge can be accessed via the following link:

(ii) EIOPA publishes updated technical methodology documentation for the risk-free interest rate term structures for Solvency II

During Quarter 1, EIOPA published updates to the technical documentation of the methodology to derive EIOPA's risk-free interest rate term structures ("RFR") for Solvency II (the "RFR Updates").

Under Solvency II, the RFR underpins the calculation of liabilities by insurance and reinsurance undertakings. EIOPA is required to publish the RFR.

The RFR technical methodology documentation aims to assist users in complying with their obligations under the Solvency II Directive by explaining in a transparent manner how the relevant RFRs are derived. It is published to achieve a consistent calculation of technical provisions. EIOPA notes that it does not constitute legal advice.

The RFR Updates during the Quarter include:

In January 2017, the update includes the following changes:

  • The use of the input data for the derivation of the risk-free interest rates for the Mexican peso was aligned with the maturity of the underlying financial instruments.
  • The peer country that is used to derive the fundamental spreads for Latvian government bonds was changed from Spain to Ireland to reflect market developments with regard to the government bond yields of these countries. The fundamental spread is used to calculate the matching adjustment and the volatility adjustment to the risk-free interest rates.

The changes will be taken into account in the production of the technical information for end of January 2017.

  • In February 2017, the update includes the following changes:
  • The government bond tickers for Bulgaria, China, India, South Africa, Taiwan and Thailand are discontinued by the data provider and are replaced accordingly. The new tickers are applied for reference dates as of 1 February 2017.
  • The annual update of the transition matrices for the calculation of the fundamental spreads in January 2017 was reflected in the technical documentation.

The changes will be taken into account in the production of the technical information for end of February 2017.

The RFR Updates can be accessed via the following link:

(iii) EIOPA publishes Solvency II relevant risk-free interest rate term structures

EIOPA intends to publish the RFR on a monthly basis to ensure consistent calculation of technical provisions across the EU.

In Quarter 1, EIOPA published the RFR as follows:

  • With reference to the end of December 2016 on 9 January 2017;
  • With reference to the end of January 2017 on 7 February 2017; and
  • With reference to the end of February 2017 on 7 March 2017.

Undertakings should note that EIOPA has stated on their website that, in certain circumstances, it may be necessary to amend and/or republish the technical information after it has been published.

EIOPA's background material and the monthly technical information on the relevant risk-free interest rate term structures can be accessed via the following link:

(iv) EIOPA publishes updated Solvency II Questions and Answers

During Quarter 1, EIOPA published updated Solvency II Q&As on the following:

  • (EU) No 2016-1800 with regard to the allocation of credit assessments of external credit assessment institutions (Published 16 January 2017);
  • (EU) No 2015/2450 with regard to the templates for the submission of information to the supervisory authorities (Published 31 March 2017);
  • (EU) No 2015/2452 with regard to the procedures, formats and templates of the solvency and financial condition report (Published 31 March 2017);
  • Answers to questions on Guidelines on reporting for financial stability purposes (Published 16 January 2017);
  • Answers to questions on Symmetric Adjustment of the Equity Capital Charge (Published 30 January 2017);
  • Answers to questions on Guidelines on the loss-absorbing capacity of technical provisions and deferred taxes (Published 21 February 2017);
  • Answers to questions on Guidelines on classification of own funds (Published 31 March 2017);
  • Answers to questions on Guidelines on reporting and public disclosures (Published 31 March 2017); and
  • Risk – Free Interest Rate – Financial Market Data (Published 16 March 2017).

The EIOPA Solvency II Q&As can be accessed via the following link:

(v) EIOPA publishes official translations of Guidelines on effective dialogue between competent supervisory authorities

On 2 February 2017, EIOPA published the translations of the Guidelines on Facilitating an Effective Dialogue between Insurance Supervisors and Statutory Auditors (the "Guidelines") into all official languages of the European Union following publication of the final version in December 2016.

In line with the objectives of the European reform on statutory audits and according to Article 16 of the EIOPA Regulation and of Article 12(2) of Regulation 537/2014 (the "Audit Regulation"), EIOPA was required to issue Guidelines addressed to competent authorities supervising insurance undertakings for the purpose of facilitating the establishment and the maintenance of an effective dialogue between the competent authorities supervising insurance undertakings, the statutory auditor(s) and the audit firm(s) carrying out the statutory audit of those undertakings. The Solvency II Directive (2009/138/EC) sets out legal requirements on statutory auditors to report promptly any facts which are likely to have a serious effect on the financial situation or the administrative organisation of a (re)insurance undertaking.

The Guidelines cover the approach to the dialogue, the nature of information to be exchanged, the form of the dialogue, the representatives in the dialogue, the frequency and timing of the dialogue, the dialogue with auditors or audit firms collectively and compliance and reporting rules

According to EIOPA, the publication of the translations of the Guidelines indicated the start of a "comply or explain" reporting process which involves each competent authority confirming whether they comply or intend to comply with the Guidelines during a 2-month period.

The Guidelines are addressed to competent authorities supervising (re)insurance undertakings and will apply from 31 May 2017.

The Guidelines are available at:

To view the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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