November 2015
Eiopa announces shift from regulatory to supervisory role..
Gabriel Bernardino has indicated that the European Insurance and Occupational Pensions Authority (Eiopa)’s governance will move from a regulatory role towards a supervisory one.
Speaking at Eiopa’s annual conference in Frankfurt, the authority’s chairman said he was “managing change” by “moving from regulation to supervision”.
He added that supervisory convergence was essential to ensure the application of EU regulation, achieve a level playing field and safeguard a similar level of protection to all policyholders.
Bernardino went on to discuss Solvency II and how the various differences in internal models could have a huge impact on attempts to create equal conditions for insurers.
“Being an innovative element in the Solvency II framework, internal models are particularly prone to inconsistent approaches,” he said.
“Eiopa already issued in 2015 a couple of supervisory opinions with recommended practices to NCAs [national competent authorities] and this work will continue by prioritising the areas where different approaches lead to a material impact,” he said.
“Going forward we will focus on the development and testing of sound ongoing appropriateness indicators and benchmarking for internal models. This work will be fundamental to avoid that internal models become a capital optimisation tool. A race to the bottom will kill the underlying idea of an internal model.”
Bernardino also stressed the importance of insurer financial stability and said that Eiopa aimed to increase the sector’s resilience and limit risky behaviour as companies continued to search for yield.
“Resilience could be improved by cancelling or deferring dividends, reducing the maximum guarantees offered in new contracts and limiting the participation features and the commission levels,” he said.
The chairman added that resilience could also be enhanced by strengthening the recovery and resolution framework.
Finally, Bernardino touched on Eiopa’s role in developing international capital standards for insurance.
“Areas like the investment behaviour of insurers and the product availability to consumers will receive special attention. On a yearly basis we will assess the consequences of the implementation of the long-term guarantee measures,” he said.
“The coming years should also be used to further analyse the calibration of different asset classes under Solvency II, including sovereign bonds. The recent financial crisis has demonstrated to all of us that sovereign bonds are not always risk-free, so a risk-based regulatory framework should take this into account.”
Bernardino added that any regulatory treatment should focus on building appropriate incentives to avoid excessive concentration on a specific sovereign.
