EIOPA’s Project on the Review of the Solvency Capital Requirement Standard Formula Under Solvency II
EIOPA supports a sound process of post-evaluation of the new insurance supervisory regime. One of EIOPA’s key objectives is to ensure a rigorous, evidence-based and transparent review of Solvency II.
As part of this process, EIOPA has launched the project dedicated to the review of the Solvency Capital Requirement (SCR) standard formula. This project will address the three priorities of the two calls for technical advice from the European Commission:
- First, on simplifications and proportionate application of the SCR requirements.
- Second, on removal of technical inconsistencies, i.e. recalibration of certain risks and other technical issues; and
- Third, on removal of unjustified constraints to financing.
The timeline reflects the reliance on the use of data arising from annual reporting. A first set of advice for which no annual reporting data is required contains the following items: simplified calculations, look-through approach for investment related vehicles, reducing reliance on external credit ratings, treatment of guarantees and exposures to regional governments and local authorities, risk-mitigation techniques, undertaking specific parameters and information on loss-absorbing capacity of deferred taxes. The second set includes advice for which annual reporting data is needed and includes all other items arising from the calls for technical advice: risk margin, simplifying the look-through approach, policy options on loss-absorbing capacity of deferred taxes, premium and reserve risks, catastrophe risks, mortality and longevity risks, counterparty default risk, currency risk at group level, interest rate risk, own funds, unrated bonds and loans, unlisted equity and strategic participations.