1 SOLVENCY II
1.1 IRRD and Solvency II Amending Directive published in OJ
On 8 January 2025, the Insurance Recovery and Resolution Directive (IRDD)1 and the Solvency II Amending Directive2 were published in the Official Journal of the European Union. Both pieces of legislation were approved under the corrigendum procedure and entered into force on 28 January 2025.
Member States are required to adopt and publish the measures necessary to comply with Articles 1 to 91, 96 and 97 of the IRRD and the measures necessary to comply with the Solvency II Amending Directive by 29 January 2027. These measures will apply from 30 January 2027.
The IRRD can be accessed here.
The Solvency II Amending Directive can be found here.
1.2 Consultation paper on the proposal for revised Guidelines on the methods for determining market shares for reporting
On 3 February 2025, EIOPA published a consultation paper3 presenting the proposed revised Guidelines on methods to determine market shares in order to limit supervisory reporting under Article 35(11) of the Solvency II Directive4.
EIOPA aims to provide clarity to the roles of undertakings and supervisory authorities by promoting the use of the option to use the limitation/exemption from reporting. The paper has revised and simplified the Guidelines in a manner which is not expected to have a material impact on the insurance industry or supervisory authorities.
The deadline for providing feedback on the consultation paper is 28 April 2025.
The consultation paper can be found here.
Responses to the consultation can be provided here.
2 EIOPA
2.1 EIOPA opinion on reassessment of natural catastrophe risks in standard formula
On 30 January 2025, EIOPA published an opinion5 on the 2023/24 reassessment of natural catastrophe (NatCat) risks in the standard formula under the Solvency II Directive. This opinion followed an EIOPA consultation on the reassessment of NatCat risks in April 2024, carried out to confirm that NatCat parameters of the standard formula remain valid.
EIOPA has noted the increased prevalence of natural disasters and extreme weather events due to climate change. Therefore, in order to ensure that policyholders were safeguarded, and the insurance market was stabilised, EIPOA issued the following recommendations:
- Updates to the way that NatCat risks are accounted for in insurers' standard formula calibrations.
- The formulisation of an approach to re-assess and recalibrate the NatCat solvency capital requirements (SCR) on a regular basis.
- Adjusting standard formula risk factors for natural perils for certain regions.
- Expanding the number of countries considered.
The broadest update has occurred in the area of flood risk. Three countries have been recalibrated to better match the risks insurance companies with underwritten businesses in the region face. Seven further countries have been proposed for inclusion in the standard formula after their risk was found to be material. EIOPA is also monitoring the emergence of additional perils with potential for inclusion in the standard formula calibrations.
EIOPA has submitted the report for consideration to the European Commission.
The full opinion can be found here.
2.2 EIOPA supervisory statement on deduction of foreseeable dividends from own funds
On 20 February, EIOPA published a supervisory statement6 on the deduction of foreseeable dividends from own funds under the Solvency II Directive7.
Under Article 70(1)(b) of the Solvency II Delegated Regulation8, insurance and reinsurance undertakings and groups are required to deduct foreseeable dividends and charges from own fund items. EIOPA states that the main methods used to deduct foreseeable fund dividends are the annual full deduction approach, the quarterly accrued deduction approach and the approach where foreseeable dividends are deducted after the approval of the administrative, management or supervisory body.
EIOPA is currently reviewing a Commission Implementing Regulation9 to reflect changes stemming from the Solvency II review and to consider other changes relevant for supervisory purposes. The following guidance is provided:
- EIOPA expects supervisory authorities not to prioritise supervisory actions where an undertaking or group uses the quarterly accrued approach.
- EIOPA considers annual full deduction a feasible option where undertakings or groups operate in a more stable and predictable environment or where there is a high expectation or history of paying a fixed amount as dividends,
- EIOPA considers the deduction of dividends after formal approval of the AMSB a feasible option only in the event of objective difficulty in estimating foreseeable dividends.
The full supervisory statement can be accessed here.
2.3 EIOPA peer review report on supervision of stochastic valuation
On 5 March 2025, EIOPA published a peer review report on the supervision of the stochastic valuation method10 under the Solvency II Directive.
The report was conducted alongside National Competent Authorities (NCAs) to assess their supervision of the identification and valuation of options and guarantees requiring stochastic valuation.
Overall, 21 Member States participated in the review for either the full or limited scope. Among the findings of the report was that stochastic valuation was being increasingly utilised by insurers and reinsurers despite its complexity. Among the actions recommended by the report are:
- Improving the identification of options and guarantees.
- Developing national guidance and implementing supervisory activities related to the valuation of stocks and guarantees.
Some examples of practices praised by the report include measures implementing EIOPA guidelines along with national specific guidance and measures adopted by NCAs to supervise stochastic valuation.
EIOPA intends to update the stochastic valuation section of its supervisory handbook to include the review and accompanying guidance.
A full copy of the report can be found here.
2.4 EIOPA technical advice on capital requirements for cryptoasset investments
On 27 March 2025, EIOPA published technical advice11 to the European Commission on standard formula capital requirements for investments in cryptoassets.
EIOPA notes that Solvency II lacks specific provisions for cryptoassets. This has led to insurers classifying their cryptoassets without a consistent approach raising concerns about risk sensitivity and the level of prudence associated with these types of assets.
Empirical analysis of historical cryptoasset data conducted by EIOPA suggests that current capital weight options underestimate risks associated with cryptoasset exposure. As a result of this, it recommends that a one-to-one capital requirement is applied consistently to all cryptoasset holdings of EU insurers. This can be achieved by:
- Amending Article 203 of the Solvency II Delegated Regulation to include a clarification that cryptoasset exposures fall under the intangible asset module with a specific stress of 100%.
- Amending Article 168(3) of the Solvency II Delegated Regulation to exclude exposures to cryptoassets from type 2 equity.
EIOPA recommends a 100% haircut in the standard formula for these assets in light of their inherent risks and high volatility. Additionally, EIPOA has rerecommended a review in future of the treatment of cryptoassets under the Solvency II framework to reflect the wider adoption of cryptoassets in the insurance sector.
The full technical advice can be accessed here.
To view the full article, click here .
Footnotes
1.(EU) 2025/1
2. (EU) 2025/2
3. EIOPA-BoS-24-594
4. 2009/138/EC
5. EIOPA-BoS-24/462
6. EIOPA-25/135
7. 2009/138/EC
8. (EU) 2015/35
9. (EU) 2023/894
10. EIOPA-BoS-25-066
11. EIOPA-BoS-25/068
Originally published 15 April 2025.
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.
