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CP-16/008 from EIOPA on Discussion Paper on the review of specific items in the Solvency II Delegated Regulation

17 February 2017
Kathryn Moore

EIOPA have issued a fairly far reaching review of some of the items in the delegated regulation. The time period for submitting to this consultation paper is until 3rd March 2017. The areas covered are:

  1. Simplifications in SCR formulas The Commission has asked EIOPA why more insurers are not using simplifications. EIOPA are asking whether the proof that the simplification is proportionate and that the error generated is small is an issue. Specific reference is made to the life insurance SCR simplifications as well as the non life. The key issues for a lot of these simplifications are that the simplifications are not simple and that the proof of proportionality is a complex exercise. 2. Reducing reliance on external credit ratings. The Commission has asked EIOPA to review the Delegated Regulations to make sure that they do not place too much emphasis on external credit ratings. This is difficult as credit ratings tend to permeate the whole of the regulations on market related stresses from credit stress, reinsurance values and stresses, counterparty stresses and concentration risk. EIOPA is wanting alternatives suggested and this includes:
  2. Internal models of credit ratings. The national supervisors have quite extensive requirements on checking internal models and the work required would be high.
  3. Market implied ratings and accountancy based models. Credit default swaps are mentioned here.
  4. Any other alternative. Proportionate use of external credit ratings is also mentioned.