1. SOLVENCY II
1.1 EIOPA publishes peer review on outsourcing
On 19 July 2022, the European Insurance and Occupational Pensions Authority (EIOPA) published a peer review on outsourcing. The review assessed the overall maturity of the framework implemented by national supervisory authorities regarding outsourced activities of insurance and reinsurance undertakings with the objective of identifying gaps, areas of improvement and best practices to promote consistent and effective supervision.
The review revealed that European undertakings are making increasing use of outsourcing, specifically in the area of technology. The review further revealed that national supervisory authorities' primary focus is ongoing supervision of outsourced activities, and whilst some enforce strict notification processes, the majority of policies are less prescriptive on this front.
The peer review notes that the Central Bank of Ireland (Central Bank) has already conducted detailed thematic reviews on outsourcing and EIOPA recognises that Ireland employs best practices in respect of the communication of the outsourcing framework to the market, publishing consultation papers and discussion papers which offer guidance to industry.
EIOPA determined that there are certain areas where national supervisory authorities needed to increase their supervision of notification processes, identifying the following areas for further analysis:
- The outsourcing of delegated authority;
- The definition of 'material development' and the meaning of 'timely notification' according to article 49(3) of Solvency II, and;
- The supervision of undertakings that make such extensive use of outsourcing that it impacts their corporate substance.
A copy of the peer review can be accessed here.
1.2 EIOPA publishes application guidance on how to reflect climate change in ORSA
On 2 August 2022, EIOPA published application guidance on how to reflect climate change in the Own Risk and Solvency Assessment (ORSA). EIOPA encourages forward-looking and long-term approaches to managing climate change related risks and has provided expanded guidance on materiality assessment in relation to climate change (including through technical examples of the materiality assessment using examples of dummy companies), climate change scenario design and specifications using concrete case studies.
The guidance provides an insightful basis on how to implement sustainable finance ambitions in practice and indicates the areas in which an undertaking can address climate change risks in ORSA, namely:
- Management or executive summary;
- Undertaking's vision and strategy;
- Undertaking's risk appetite or risk profile;
- Risk assessment;
- Scenario analysis;
- Management actions, and.
The guidance further recommends addressing climate change in multiple areas of the ORSA report and performing regular analysis on the impact of climate risk.
A copy of the guidance can be accessed here.
1.3 EIOPA tracks progress on Solvency II data quality
On 6 September 2022, EIOPA published its report on data quality in reporting under Directive 2009/138/EC (Solvency II). The report notes that EIOPA is constantly working to improve and assess the quality of available reporting data, which it states is the basis for successful data-driven supervision, evidence-based decision making and micro- and macro-prudential analysis.
The report finds that there has been an overall improvement in the quality of reporting from 2016 to 2021 and that work on data quality is a never-ending task. The report identifies the XBRL taxonomy tool and the use of Legal Entity Identifiers (LEIs) as integral in the process of data reporting.
A copy of the report can be accessed here
1.4 Updated Questions and Answers on Regulation
During the third quarter of 2022, EIOPA published updated Questions and Answers (Q&As) relating to the following topics under the Solvency II Directive:
- Reporting Templates: Question ID 2465, Question ID 2377, Question ID 2272
- Solvency Capital Requirement: Question ID 2447, Question ID 2442
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