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 2018 on 8 January 2019;
  • With reference to the end of January 2019 on 6 February 2019; and
  • With reference to the end of February 2019 on 6 March 2019.

The monthly symmetric adjustment of the equity capital charge can be accessed here.

(ii) EIOPA publishes monthly technical information for Solvency II relevant risk free interest rate term structures

During the period of 1 January 2019 to 31 March 2019, EIOPA published technical information in relation to risk free interest rate term structures, as follows:

  • With reference to the end of December 2018 on 8 January 2019;
  • With reference to the end of January 2019 on 6 February 2019; and
  • With reference to the end of February 2019 on 6 March 2019.

The risk free interest rate term structures are published to ensure the consistent calculation of technical provisions for (re)insurance obligations across the European Union. 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) ECON outlines concerns over the review of the Solvency Capital Requirement standard formula

On 22 January 2019, ECON published a press release in which it raised concerns in respect of the amendments to the Solvency II Delegated Regulation (EU) 2015/35 (The "Delegated Regulation"), related to the review of the Solvency Capital Requirement ("SCR") standard formula.

In the press release, ECON reiterated its support for a reduction of the current risk margin in order to boost the financing of the real economy and to encourage the insurers to invest in long-term projects. However, it detailed its concern that the current design of the criteria of a new equity class for long-term investments could prevent the long-term equity class from working in practice. Specifically, the 12-year duration and the ring-fencing requirements were identified as potential concerns in this context.

ECON reiterated its position on the importance of finding a short-term solution to address the shortcomings of the current functioning of the Volatility Adjustment and recommended that the national component should be calculated at the end of the period if the conditions are met at any time during the period itself, based on a daily calculation.

ECON also highlighted concerns in relation to the application date of the new provisions in light of the delay in adopting amendments to the Delegated Regulation. In particular, ECON is concerned that the current application date may create non-negligible difficulties for the reporting process due to the very short period of time that will elapse between the expected date of entry into force of the new delegated act and the first application for reporting obligations.

ECON called on the European Commission to take the above-mentioned points into account as part of the 2018 SCR Review.

The press release can be accessed here.

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