Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • March 2017
03

Solvency II means no need for new EU insurance framework

Open-access content Thursday 9th March 2017 — updated 5.50pm, Wednesday 29th April 2020

No major overhaul of EU insurer recovery and resolution rules is needed as Solvency II already provides strong enough safeguards, according to Insurance Europe.

2

This announcement is in response to a European Insurance and Occupational Pensions Authority (EIOPA) consultation on the potential harmonisation of frameworks for insurers.

The lobby group said in its position paper that Solvency II already allows early intervention when either the Minimum Capital Requirement (MCR), or the Solvency Capital Requirement (SCR) are breached, and that this is sufficient.

It states: "Insurance Europe believes it is important to reiterate that Solvency II already provides several safeguards that need to be considered.

"SCR ensures a high level of capital buffer, calibrated to ensure a firm will remain able to meet all obligations to policyholders even after a 1-in-200-year loss event.

"The supervisory ladder of intervention in Solvency II allows supervisors to begin taking actions when the SCR is breached and to fully take over the company if the MCR is breached."

"Even before Solvency II, there were very few failures and even fewer resulting in any losses for policyholders. Insurers have rarely needed to benefit from government support, and under Solvency II they will be far less likely to do so in the future."

It goes on to say that Solvency II also includes national provisions for the winding-up of insurers and national insolvency laws, negating the need for supervisors to be given powers to intervene before the SCR is breached.

In addition, Insurance Europe has highlighted that traditional insurance business has proven extremely resilient to business cycle fluctuations in the past, concluding that concerns about financial stability do not justify a new framework.

This is in contrast to banking, which may require earlier intervention due to the interconnectivity of the practice, with failures in one bank affecting others, unlike insurance, which the EIOPA acknowledges.

Insurance Europe, head macroeconomics, Nicolas Jeanmart, said: "We welcome that the EIOPA highlighted important differences between banking and insurance.

"These differences have a significant impact on the need for, and design of, recovery and resolution requirements. Unlike in banking, insurers do not fail suddenly, as their liabilities crystallise gradually over time, allowing for a managed wind-down.

"In addition, insurance liabilities are largely independent of each other, and are not 'callable' on demand since an insurance liability occurs at a specified point in time or following a pre-defined, insured event."

However the group said that a degree convergence on recovery and resolution practices could be beneficial, such as:

• Clarification that there should be no implicit or explicit powers of intervention before there has been a breach of the SCR
• 'Stay and suspension' powers could be extended across Europe
• Cross-border cooperation and coordination between supervisory and/or resolution authorities could be reinforced, as well as the mutual recognition of resolution actions.


Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession

This article appeared in our March 2017 issue of The Actuary.
Click here to view this issue
Filed in
03

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Catastrophe Modelling Analyst - London Market Broker

London, England
£40000 - £50000 per annum
Reference
145925

Senior Catastrophe Analyst

England, London
£65000 - £75000 per annum
Reference
145924

Life Actuary - Financial Reporting - Day Rate contract

Negotiable
Reference
145923
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ