Solvency of Insurance Undertakings (Mueller-Report) - Eiopa

The parameters A, B and C are to be appropriately determined. See annex 9 for details and a modelcalculation.It is, however, to be noted that neither of the additive methods finds a majority among the workinggroup because and as long as they result in a considerable increase of the solvency margin.Non-technical risksThe working group does not consider it appropriate, but rather extremely difficult, to take theremaining non-technical risks into account for the determination of the solvency margin. For thisreason, this idea is not pursued any further.3.2.1.2 Rates to be appliedAn agreement could not be reached.All delegations are in favour of abolishing the thresholds of ECU 10 million and ECU 7 million forthe premium index and the claims index respectively without replacing them and fixing instead onepercentage rate for each of the two indices, but a differentiation according to the business volume andthe claims volume has proven to have little effect and practical value. (It was initially intended to takethe principle of the economies of scale into consideration, but the gap between percentages was thennarrowed to such an extent that a differentiation does not make sense anymore).According to a majority of the working group the percentages should be 18 % (premium index) and26 % (claims index) respectively. Very few group members think that the rate should be increasedconsiderably. They consider rates of 36 % for premiums and 52 % for claims appropriate. Regardingthe provision index, the rates considered by the delegations are between 12 % and 15 %. Thishowever should, in the opinion of the great majority of the group, apply only if this index were to beused alternatively, but not cumulatively (see 3.2.1.1)To the extent that the introduction of an additional investment index is called for, the delegationsconsidering the assets the appropriate yardstick for determining the margin wish to follow the ECbanking regulation providing a margin of 8 % of the risk-weighted assets. With respect to the fact thatcompared to the banking sector the investment risk in insurance is considerably restricted by otherpreventive measures (investment catalogue, principle of diversification and spreading, matchingassets), the percentage mentioned would have to be considerably lower. Model calculations in onemember country showed that a reduction of the rate of 8 % applicable in banking to 7 % results in anincrease of the required minimum solvency margin by 40 %, and a reduction of this rate to 6 % resultsin an increase by approx. 30 % insofar as the rate is applied to the entire capital. If only the assetscovering the technical provisions are taken into account, the solvency margin would increase by 29 %at a rate of 7 %, and by 25 % at a rate of 6 %. In the view of the majority of delegations, this increase,just because of the investment risk that is now to be taken account of, appears too high so that afurther reduction should be considered.- 21 -