The EC has launched a consultation on the Level 2 implementing measures for Directive 2009 /138/EC on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency Ⅱ).
- Contributions
Contributions are sought from representatives of insurance and reinsurance undertakings, other financial institutions, stakeholders of insurance and reinsurance undertakings and in particular investors and industry associations, national governments, national competent authorities, consumer associations, policy holder associations and other professional organisations in the field of insurance.
- Objective of the consultation
The purpose of this public consultation is to get valuable insights, supported by quantitative and qualitative evidence, on the impacts, costs and benefits to support the policy decision-making process for the level 2 implementing measures of Solvency Ⅱ, which the Commission Services are currently developing.
- Period of consultation
From 24.11.2010 to 26.01.2011
This consultation is open until 26 January 2011. Responses should be sent to markt- solvencyII@ec.europa.eu. The Commission Services will publish all responses received on the Commission’s website unless confidentiality is specifically requested.
Modelling design focus for the consultation:
SCR: Internal model use test
“The Solvency II Framework Directive requires undertakings to demonstrate that their internal model is widely used, and plays an important role in their system of governance before it can be used to calculate the SCR. Level 2 implementing measures will prescribe further detail on how undertakings should demonstrate compliance with the use test and the minimum requirements that the system of governance should comply with.
Two policy options have been identified. Option 1 requires that, as a minimum, the internal model must be used at the top-most organisational level of the undertaking including allocating risk capital and/or taking strategic business decisions. Option 2 requires the internal model to be used at all levels of the organisation by defining in a comprehensive and mandatory manner the areas or processes where it should be used.
CEIOPS’ final advice concluded that option 1 encourages good risk management and leads to a more risk-sensitive assessment of the SCR, but could result in problems if communication between different levels of the undertaking is not appropriate. Option 2 is more effective in providing harmonisation of supervisory powers, methods and tools, but the mandatory nature of the uses may result in undertakings artificially demonstrating the use of the internal model in decision-making, which may distract resources from more useful internal model development work. Their preferred approach is to combine the use of the internal model at all levels of the undertaking included in option 2 with the consideration of the undertaking’s use of the internal model in decision-making, but without mandatory uses as in option 1.”
For the full text of the consultation paper – follow the link below to the EC website:
