National supervisory authorities (NSAs) may request extra information from insurers using third-party external models to ensure they comply with Solvency II capital requirements, the European Insurance and Occupational Pensions Authority (EIOPA) said yesterday
In an 'Opinion on External Models/Data', the organisation said an internal model application should be rejected by NSAs where insufficient compliance evidence was produced.
EIOPA acknowledged vendors' concerns regarding confidentiality of their external models' methodologies during the supervision process, but said that contractual conditions could not justify a company's refusal to demonstrate that its external model/data fulfilled all the mandatory requirements.
Instead, the Opinion noted that confidentiality provisions are already applied to supervisors under Solvency I and that the new framework also 'foresees that persons working for EIOPA and NSAs as well as auditors and experts acting on behalf of NSAs, are bound by the obligation of professional secrecy'.
Gabriel Bernardino, chairman of EIOPA, pictured, added: "This is the first EIOPA Opinion but we plan to further use such a tool. EIOPA opinions are addressed to the national supervisory authorities and represent an efficient instrument designed to promote common supervisory approaches and practices in the European Union".
The Opinion is part of EIOPA's own initiative work on pre-application for internal models and follows discussions with vendors, insurers and other relevant stakeholders on the use of external models and data.