European Union: Insurance Quarterly Legal And Regulatory Update (1 October 2017 – 31 December 2017)


(i) Corrigendum to Delegated Regulation amending Solvency II Delegated Regulation published in the Official Journal of the EU

On 13 October 2017, a corrigendum to the Commission Delegated Regulation (EU) 2017/1542) of 8 June 2017 (the "Amending Delegated Regulation") was published in the Official Journal of the EU (the "OJ").

The Amending Delegated Regulation amends the Commission Delegated Regulation ((EU) 2015/35) (the "Solvency II Delegated Regulation") concerning the calculation of regulatory capital requirements for certain categories of assets held by insurance and reinsurance undertakings. The Solvency II Delegated Regulation supplements Directive 2009/138/EC (the "Solvency II Directive").

The corrigendum amends one of the equations in Article 1(4)(c) of the Amending Delegated Regulation. The Amending Delegated Regulation entered into force on 15 September 2017.

A copy of the corrigendum can be found here.

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

The European Insurance and Occupational Pensions Authority ("EIOPA") intends to publish the technical information in relation to risk free interest rate ("RFR") term structures on a monthly basis to ensure consistent calculation of technical provisions across the EU.

In Quarter 4, EIOPA published the RFR as follows:

  • With reference to the end of September 2017 on 6 October 2017;
  • With reference to the end of October 2017 on 8 November 2017; and
  • With reference to the end of November 2017 on 6 December 2017.

Undertakings should note that EIOPA has stated on their website that, in certain circumstances, it may be necessary for EIOPA 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 here.

(iii) EIOPA publishes updated Solvency II questions and answers

During Quarter 4, EIOPA published updated Solvency II questions and answers ("Q&A") on the following:

  • (EU) No 2015-2450 on the templates for the submission of information to the supervisory authorities;
  • (EU) No 2015-2452 on the procedures, formats, and templates of the solvency and financial condition report; and
  • Answers to questions on the Solvency II Delegated Regulation.

The EIOPA Solvency II Q&As can be accessed here.

(iv) EIOPA publishes its updated Risk Dashboard based on the second quarter 2017 data

In October 2017, EIOPA published its risk dashboard for the second quarter of 2017. The risk dashboard gives an overview of risks faced by the insurance industry on a Pan-European basis.

The results show that the risk exposure of the insurance sector in the European Union remains stable overall with some slight improvements in the solvency ratios of groups and life solo undertakings. Profitability of the sector has shown some positive signs both for life and non-life. Despite some positive developments, the continuing low-yield environment and the observation that market fundamentals might not properly reflect the underlying credit risk are still important concerns for the European insurance industry.

A copy of the risk dashboard can be found here.

(v) EIOPA publishes update on Internal Model Consistency Projects

On 25 October 2017, EIOPA published an update on the Internal Model Consistency Projects to strengthen supervisory consistency and convergence in the European Union. The activities are part of the follow-up on the Opinion on the preparation for Internal Model applications issued in April 2015.

A copy of the press release can be found here.

A copy of the update can be found here.

(vi) European Free Trade Association Court considers right to choose lawyer under legal expense insurance contracts in context of Solvency II

On 27 October 2017, the European Free Trade Association Court ("EFTA court") issued a judgement concerning the compatibility of certain provisions in a legal expense insurance contract with an insured person's right of free choice of lawyer as provided for under Article 201(1)(a) of the Solvency II Directive.

The legal expense insurance contract in question contained a clause releasing the insurance company from its obligations if the insured person instructed a lawyer without the prior consent of the insurance company.

The EFTA court concluded that these terms in the contract were not compatible with Article 201(1)(a) under the Solvency II Directive. The EFTA court stated that under a legal expenses insurance contract, the insured person is entitled to have recourse to a lawyer of his choice to defend, represent or serve his interests in any inquiry or proceedings.

A copy of the press release can be found here.

A copy of the judgment can be found here.

(vii) EIOPA publishes final report on first set of technical advice on Solvency II Delegated Regulation

On 31 October 2017, EIOPA published its final report (dated 30 October 2017) on the first set of advice to the European Commission on specific items in the Solvency II Delegated Regulation. The advice covers the following areas:

  • Simplified calculations in the Solvency Capital Requirement ("SCR") standard formula;
  • Reducing reliance on external credit ratings in the standard formula;
  • Treatment of guarantees, industry exposures guaranteed by third parties and exposures to regional governments and local authorities;
  • Risk-mitigation techniques;
  • Undertaking specific parameters;
  • Look-through for investment related undertakings;
  • Loss-absorbing capacity of deferred taxes, factual information only; and
  • Impact assessment.

EIOPA had previously consulted on a first set of advice and the final report contains some modifications as a result of that consultation.

A copy of the first set of advices can be found here.

A copy of the final report on the first set of advices can be found here.

A copy of the summary of comments can be found here.

(viii) EIOPA publishes consultation paper on a second set of technical advice on Solvency II Delegated Regulation

On 6 November 2017, EIOPA published a consultation paper on a second set of technical advice to the European Commission on specific items in the Solvency II Delegated Regulation. The consultation is due to close on 5 January 2018.

The consultation focuses on those elements in the review of the SCR standard formula not addressed in the first set of technical advice, namely:

  • Recalibration of standard parameters of premium and reserve risks;
  • Mortality, longevity, health catastrophe, man-made catastrophe, natural catastrophe and interest rate risks;
  • Market risk concentration;
  • Unrated debt and unrated equity;
  • Treatment of exposures to central counterparties under EMIR;
  • Loss-absorbing capacity of deferred taxes; and
  • Eligible capital instruments.

A copy of the consultation paper can be found here.

To read this Update in full, please 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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