Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
CEIOPS’ Work on CEIOPS’ Work on Solvency IISolvency II
VI International VI International Conference on Conference on Insurance and Insurance and Pension Funds, Pension Funds, LisboaLisboa, X/25/2007, X/25/2007
2
Outline
• Introduction to CEIOPS activity– Main strands of work– Organisation
• The SII project– Drivers– Timeframe– QIS 1, 2 and 3– Potential hurdles
• Role of CEIOPS as level 3 Committee– Toolkit
3
Introduction to Introduction to CEIOPS activityCEIOPS activity
Since its establishment, CEIOPS’ activity has operated in a particular legislative context, very different from that of the other L3 committees
• In insurance, a radical change is under preparation. CEIOPS received waves of calls for advice for the Solvency II framework directive
• In pension funds and intermediary sectors, the EU legislative framework is recently transposed and achieves a limited degree of harmonization
CEIOPS had to shape its organization and work plan accordingly: scope for Level 3 activity restricted and challenging
4
Insurance Groups Supervision Committee
Patrick Brady, Ireland
Financial StabilityCommittee
Kajal Vandenput, Belgium
Occupational PensionsCommittee
Tony Hobman, United KingdomInternal Governance,Supervisory Review and Reporting Expert Group
Gabriel Bernardino, Portugal
Internal ModelsExpert Group
Paul Sharma, United Kingdom
Financial RequirementsExpert Group
Pauline de Chatillon, France
IntermediariesExpert Group
Victor Rod, Luxembourg
Members´ Meeting
ManagingBoard
Chair: Thomas Steffen, GermanyW
o r
k i n
g
G r
o u
p s
ConsultativePanel
S e c r e t a r i a t
ConvergenceCommittee
Michel Flamée, Belgium
Siena Protocol Revision Task Force
Peter Braumüller, Austria
Solvency II:
5
The Solvency II Project: The Solvency II Project: DriversDrivers
Consistency with economic Consistency with economic reality and risk sensitivenessreality and risk sensitiveness
Compatibility with IASBCompatibility with IASB
Incentives for internal risk Incentives for internal risk managementmanagement
Streamlined group supervisionStreamlined group supervision
Comparability with banking rulesComparability with banking rules
6
The Solvency II Project:The Solvency II Project:Main aspects of CEIOPS Main aspects of CEIOPS
adviceadvice
PILLAR I
• Technical provisions• Capital requirements (SCR and MCR)• Safety Measures (eligible assets,
quantitative limits)• Own Funds (basic own funds, ancillary
own funds, tier structure)
7
The Solvency II Project:The Solvency II Project:Main aspects of CEIOPS Main aspects of CEIOPS
adviceadvice
PILLAR IISupervisory review process: “dialogue” with the management
(ORSA)
The review may highlight that there are:
1. Risks not captured by the standard f. (or not captured enough)- Partial or full internal model- Capital add-on
2. Deficiencies in governance, risk management or internal control- Restoring measures- Capital add on
8
The Solvency II Project:The Solvency II Project:Main aspects of CEIOPS Main aspects of CEIOPS
adviceadvicePILLAR IIIDisclosure of capital requirements
– Overall capital requirement, without specification of any capital add-on
– Public disclosure of any breach to MCR or SCR, if necessary, before the year end ( a transitional period may be needed)
– Adequate consumer informationValuation
– Over-riding principle: methodologies for calculating items in general purpose financial reports should be used for, or be substantially consistent with the methodologies used for supervisory reporting
-> Prudential filters should be limited as much as possible
9
Incentive for risk management:Incentive for risk management:Dynamics of capital requirementsDynamics of capital requirements
MCR
SCRSCR
AdjustedSCR
AvailableCapital
Safetynet
Standardmodel
InternalModel
Supervisoryintervention
Pillar IInsurance, market, credit
and operational risk
Pillar IIAdditional risks or deficiencies
Including capital add-onfollowing SRP
Decrease / [increase] if
internal modelreflects risks
more appropriately
Increase ifrisks not
appropriatelyreflected or governance
deficient
Pillar IIIDisclosure of
Solvency requirementsand breaches
10
Groups
• For each Group a group supervisor – Specific rights and duties
• Group level diversification benefits– Active debate on when and how to recognise these
• Group capital (SCR) monitored by group supervisor; MCR set for individual subsidiaries by solo supervisors– SII Directive allows firms to opt for group
supervision, subject to satisfying conditions/supervisor approval
11
The Solvency II ProjectThe Solvency II ProjectProcess Process
Past CEIOPS contributionPast CEIOPS contribution
07/04 12/04 02/05 04/05 06/05 07/05 10/05 12/05 01/06 03/06 04/06 06/06 10/06
Framework for
Consultation
First wave of CfA
Second waveof CfA
Third waveof CfA
Answers to the firstwave
Amended Framework
for Consultation
Additional Request
for Advice
QIS1 QIS 2PFS
09/05
FurtherAdvice
FurtherAdvice
Answers to the second wave
Answers to the third wave
03/07
Amended Framework for Consultation
12
Additional Request for QIS
CEIOPSCEIOPSPresent and FuturePresent and Future
01/07 03/07 04/07 06/07 10/07 04/08
Further advice
QIS3
Amended Framework for Consultation
07/07
Directive negotiation (adoption end 2008, early 2009) and preparation of Level 2 measures (1st half 2010, adoption 2nd half; Level 3 guidance). Implementation by 2012
Further Advice on Implementing Measures
12/07
Draft QIS4 specifications
Launch of QIS4
QIS3 Report
QIS5, QIS6 ?
Advice on proportionalityAdvice on groups
05/08
13
Level 3 work of CEIOPS Level 3 work of CEIOPS on Solvency IIon Solvency II
Contributing to effective EU regulatory convergenceContributing to effective EU regulatory convergence•• Exchange of information on national interpretation and implemenExchange of information on national interpretation and implementationtation•• Comparisons on national transpositions (also webComparisons on national transpositions (also web--based)based)
Converging supervisory processes and toolsConverging supervisory processes and tools•• Standards on supervisory toolStandards on supervisory tool--kit and best practiceskit and best practices•• Common reporting and sharing of data between supervisorsCommon reporting and sharing of data between supervisors
Creating common supervisory cultureCreating common supervisory culture•• EUEU--wide training programmeswide training programmes•• Platform for exchange of staff of EU Supervisory AuthoritiesPlatform for exchange of staff of EU Supervisory Authorities
Facilitating cooperation in day to day supervisionFacilitating cooperation in day to day supervision•• Conclusion and review of agreements (Conclusion and review of agreements (MOUsMOUs))•• Developing operational networks (groups)Developing operational networks (groups)
–– Streamlined exchange of informationStreamlined exchange of information–– Common assessmentCommon assessment–– Joint activities (on site inspections)Joint activities (on site inspections)
14
Testing the impact of SII: Testing the impact of SII: QIS3QIS3
• Aims of this exercise:– High participation rate by the industry– Practicability and suitability of calculation– Impact on balance sheets– Suitability of the tentative calibrations– Impact at group level
• General approach– Minimum of options and double calculations– Reduced complexity and better explanation of
underlying rationale – “Best efforts basis”– Analysis of group data
15
Market CoverageMarket Coverage
28 out of 30 EEA 28 out of 30 EEA Member Countries Member Countries participatedparticipated
New in the New in the Sample: Sample:
•• BulgariaBulgaria•• CyprusCyprus•• GreeceGreece•• Latvia Latvia •• SlovakiaSlovakia
16
Participation by countryCountry Life Non-Life ein--surancComposite Total
Mutuals thereof
Health thereof
Austria 6 10 0 11 27 3 6Belgium 1 6 0 8 15 0 0Bulgaria 2 4 0 0 6 0 1Cyprus 3 2 0 0 5 0 0Czech Republic 1 3 0 8 12 0 0Denmark 31 38 0 0 69 16 0Estonia 4 3 0 0 7 0 0Finland 8 11 0 0 19 7 0France 41 52 2 59 154 77 0Germany 60 110 9 0 179 41 23Greece 1 0 0 0 1 0 0Hungary 4 3 0 6 13 1 0Iceland 2 5 0 0 7 0 0Ireland 16 16 7 0 39 0 0Italy 29 26 0 18 73 2 0Latvia 1 1 0 0 2 0 0Lithuania 3 8 0 0 11 0 0Luxembourg 6 7 3 0 16 2 2Malta 2 2 0 1 5 0 0Netherlands 14 44 0 0 58 14 23Norway 3 16 0 0 19 5 0Poland 9 15 0 0 24 2 0Portugal 14 14 0 5 33 1 0Slovakia 3 0 0 2 5 0 0Slovenia 2 2 2 5 11 1 0Spain 15 57 2 34 108 38 0Sweden 14 13 0 0 27 22 0United Kingdom 35 43 3 1 82 19 0Total 330 511 28 158 1027 251 55
17
Market coverageCountry Life Non-Life HealthAustria 88.6 69.9 100.0Belgium 68.0 55.0Bulgaria 44.0 24.0 59.0Cyprus 56.0 13.0Czech Republic 84.7 90.9Denmark 75.0 76.3Estonia 87.0 31.0Finland 95.0 89.0France 80.8 56.4Germany 84.0 77.0 84.0Greece 12.0 0.0Hungary 86.0 86.0Iceland 72.0 100.0Ireland 47.0 37.0Italy 71.3 82.4Latvia 41.0 10.0Lithuania 41.9 74.7Luxembourg 9.0 60.0 89.0Malta 92.0 17.5Netherlands 68.0 57.0 68.0Norway 62.6 88.5Poland 74.0 80.9Portugal 98.7 93.7Slovakia 50.1 47.6Slovenia 97.0 88.0Spain 76.2 77.8Sweden 61.0 65.0United Kingdom 65.8 73.5
18
QIS3QIS3Preliminary ResultsPreliminary Results
• Broad impact– TP decreases, capital requirement increases
… philosophy of SII in removing implicit prudence in the TP and including more risks in the capital requirements
– Most undertakings see a decrease in the solvency ratio…– …but remain solvent
• Capital– Little information on impact of Tier structure
• Technical Provisions– Life: problems with valuation of options and guarantees– Non-life: segmentation issues
19
QIS3QIS3Preliminary ResultsPreliminary Results
• SCR– Many comments on individual modules…– …especially on non-life parameterisation, credit default risk and
on the correlations
• MCR– Most participants favour compact approach over modular
approach– Some negative MCRs observed due to profit sharing policies in
life business
• Group results– Less data received than was hoped for: 50 group results from 16
member states
20
Potential hurdles to Potential hurdles to the success of SIIthe success of SII
Complexity of the new supervisory frameworkSupervisory discretion inherent to a principle based approachInconsistent national implementationsDivergent approach and tools in national supervisionLack of expertise at national levelFragmented supervisory processHigh cost for compliance
The legislative framework should set the basis for avoiding or limiting these issues.
But this needs to be complemented by appropriate actions at level 3.
These issues will be covered by CEIOPS’ role as a Level 3 Committee.
21
Solvency IISolvency IIFuture DevelopmentsFuture Developments
• Important dates
– 20 November: publication of the QIS3 report
– Mid December: release of the QIS4 draft specifications for consultation
– QIS4 in 2008
– Implementation: 2012
22
The way forward
• Solvency II is not only a set of rules addressed to firms, but a comprehensive system for carrying out day to day supervision
• Its success will also depend on how CEIOPS will cover its role as a Level 3 Committee, supporting national supervisors
• At the moment CEIOPS is contributing to creation of the regulatory framework (level 1 and, soon, level 2)
• But actual implementation of Solvency II should rely on advanced and convergent supervisory arrangements and tools at EU level (level 3).
• CEIOPS intends to develop its activity accordingly, in cooperation with all stakeholders.
23
THANK YOU…THANK YOU…And see you in FrankfurtAnd see you in Frankfurt
CEIOPS conference CEIOPS conference XI/20/2007XI/20/2007
www.www.ceiopsceiops.org.org