LONDON, Tuesday 25 April, 2017 — The insurance sector is at risk of being further marginalised by investors as performance reporting becomes more complicated as a result of Solvency II, according to a report published jointly by Autonomous Research and Willis Towers Watson. Based on the analysis of the reporting statements of 31 European insurers, the report finds Solvency II has forced apart the sector’s accounting and solvency reporting, making it harder for investors to have a clear picture of how individual insurers are performing.
The report finds that Solvency II falls significantly short as a profit performance and cash generation metric that can replace embedded value (EV). The urgency of this issue is further underlined by the rapidly shrinking publication of useful EV data in Europe and the fact that the reformation of IFRS (new proposals expected to be published in May) is unlikely to help for many years. Continue reading Complex reporting caused by Solvency II risks putting investors off insurance sector
The European Insurance and Occupational Pensions Authority (EIOPA) has identified some required amendments to the Implementing Technical Standard on the templates for the submission of information to the supervisory authorities (ITS on Reporting) and in the Implementing Technical Standard with regard to the procedures, formats and templates of the solvency and financial condition report (ITS on Disclosure).
As a result, these amendments concern the Implementing Technical Standards, the Guidelines on Reporting for Financial Stability Purposes and the Guidelines on the Supervision of Branches of Third-Country Insurance Undertakings.
Some of the amendments have an impact on the Solvency II XBRL Taxonomy, namely the governance of Taxonomy releases.
It is of utmost importance that the release of the Taxonomy planned for July 2017 and the legal basis are fully aligned.
Read more at: http://bit.ly/2oFmEPp
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…
Continue Reading “Solvency II means no need for new EU insurance framework” at The Actuary
The European Commission has identified Solvency II as “one area where significant improvements could be achieved“, for example, by “simplification” and better “technical consistency“.
So, when it published its Call for Advice in July 2016, the Commission asked EIOPA to look at the “proportionate and simplified application of the requirements, and removal of unintended inconsistencies“, within the standard formula SCR, and between Solvency II and the CRR / CRD and EMIR.
The Commission also said that it would look at the possible “removal of unjustified constraints to financing“, especially when it comes to long-term investment, and that it might ask EIOPA for a technical advice on these issues later on.
Continue Reading “Blog: Solvency II and the standard formula SCR: Commission & EIOPA review – next steps” at JD Supra Business Advisor
In his submission to the Committee of European Insurance and Occupational Pensions (CEIOPS), now known as the European Insurance and Occupational Pensions Authority (EIOPA) consultation of 2009, on the Level 2 implementation of the risk margin, Dutch actuary Hans Waszink drew attention to a fundamental flaw in the proposed formula.
In particular, he pointed out that, in certain conditions, the risk margin could be even higher than the solvency capital requirement (SCR) itself.
This incongruity had been of little practical significance in most situations, but in the current low interest rate environment and for long-duration obligations such as longevity it can, and does, produce very anomalous outcomes.
Continue Reading “A fundamental flaw in Solvency II” at The Actuary News
The European Insurance and Occupational Pensions Authority (EIOPA) has published a work plan outlining the strategic direction of its activities over the next three years, from 2017 to 2019.
The strategy is set out in a single programming document (SPD), developed in accordance with European Commission requirements to enhance consistency and comparability across European Union bodies.
The SPD specifies the tasks EIOPA is mandated, and required, to undertake, as well as its strategic objectives and pensipriorities for 2017.
Continue Reading “EIOPA sets out strategic direction of activities for next three years” at The Actuary News
The European Insurance and Occupational Pensions Authority (EIOPA
) published today an updated technical documentation on the methodology to derive the risk-free interest rate term structures (RFR) for Solvency II
The changes were required in the following areas:
- The update of the representative portfolios to calculate the volatility adjustments (VA) on the basis of more up-to-date and granular data on the investments of the European (re)insurance companies. This update was announced on 1 July 2016, see here.
- The peer country for Cypriote government bond yields used for the calculation of the volatility adjustments and the fundamental spread was changed from Greece to Portugal.
Continue Reading “EIOPA publishes updated technical methodology documentation for risk-free interest rate term structures for Solvency II” at EIOPA
Rushed changes to the ultimate forward rate (UFR) could risk pushing insurers towards sub-optimal investment strategies, which could unnecessarily impact policyholders’ returns negatively, according to Insurance Europe, the European insurance and reinsurance federation.
It says that it is unnecessary to change the UFR before the Solvency II review stressing that the current framework has several additional layers of protection in place already to make sure policyholder claims will be paid.
On possible changes to the methodology for calculating the UFR to a European Insurance and Occupational Pensions Authority meeting, Insurance Europe said there is no need for changing it either for prudential or policyholder protection reasons.
Continue Reading “Solvency II changes may threaten investment returns for policyholders” at Intelligent Insurer
A developing row over how discount rates are set has reminded European insurers that Solvency II relies on a political deal – and that political deals can be broken.
To make the directive possible, European policy-makers negotiated a compromise to soften the effect of a market-based regime on certain pockets of the industry – taking the form of the matching adjustment, volatility adjustment and transitional measures.
Few would suggest reversing any of those, but the European Insurance and Occupational Pensions Authority (Eiopa) is proposing changes to how the directive’s ultimate forward rate (UFR) is calculated – an idea that is proving highly controversial.
Continue Reading “The fault lines in Europe’s Solvency II compromise” at Risk.net