1. SOLVENCY II
1.1 EIOPA launches second phase of study on diversification in internal models
On 5 October 2021, the European Insurance and Occupational Pensions Authority (EIOPA) launched the second phase of its study on diversification in internal models under Directive (EU) 2009/138 (Solvency II Directive).
EIOPA launched the first phase of the study in October 2020 which focused on top-level risk dependencies between market, credit, life, non-life, health, and operational risks. The purpose of the second phase is to focus on lower level inter risk dependencies in order to complete the understanding of diversification effects, in combination with the respective risk profiles.
More specifically, the latest phase aims to:
- Gain an overview of the current approaches in the market and, on a best effort basis, analyse and compare the levels of diversification;
- Facilitate a better understanding of modelling dependencies, aggregation and resulting diversification benefits; and
- Enhance quality and convergence of supervision on diversification in internal models.
As part of the study, EIOPA published a technical specification providing instructions to participants, in addition to a qualitative questionnaire and quantitative reporting and validation templates.
The deadline for insurance undertakings to submit their results to their National Supervisory Authorities (NSAs) was 10 January 2022 and the NSAs must report back to EIOPA by 22 January 2022.
A copy of the press release can be accessed here.
1.2 Commission publishes Notice regarding the adaptation in line with inflation of the amounts laid down in the Solvency II Directive
On 19 October 2021, the European Commission published a notice regarding the adaptation in line with inflation of the amounts laid down in the Solvency II Directive (Notice) in the Official Journal of the European Union (OJ).
Article 300 of the Solvency II Directive provides that amounts expressed in euro within the Solvency II Directive shall be revised every 5 years to reflect the percentage change in the Harmonised Indices of Consumer Prices of all Member States, starting from 31 December 2015.
As a result, the first revision of the amounts has been performed with reference to the period between 31 December 2015 and 31 December 2020. Under the Notice, the following amounts will be increased:
- The threshold amounts under the conditions for exclusion from scope due to size;
- The balance sheet total and the net turnover amounts set out in the criteria for certain risks to be considered as 'large risks'; and
- The absolute floor of the minimum capital requirements for all non-life, life, and reinsurance undertakings, including captives in all sectors.
The revised amounts must be implemented by Member States by 19 October 2022.
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