Answers to the European Commission on the ... - Eiopa - Europa

einsurer <strong>to</strong> <strong>the</strong> insurer), in which case <strong>the</strong>y should, for <strong>the</strong> purposes of
solvency, be treated as loans and not as reinsurance. 115
12.49 The Reinsurance Management should form a part of <strong>the</strong> overall risk
management procedure and is a structured and documented approach
that defines <strong>the</strong> strategies and policies for managing and moni<strong>to</strong>ring
<strong>the</strong> reinsurance arrangements of an insurance undertaking.
Role and responsibilities of <strong>the</strong> Board of Direc<strong>to</strong>rs and Senior Management in
Reinsurance Management
12.50 The Board of Direc<strong>to</strong>rs 116 shall approve a Reinsurance Management
Strategy that is appropriate <strong>to</strong> <strong>the</strong> risk profile of <strong>the</strong> undertaking and
complies with <strong>the</strong> undertaking’s underwriting, risk management and
internal control systems. This strategy shall be reviewed on an annual
basis or, if appropriate, more frequently, but also if <strong>the</strong> insurance
undertaking’s circumstances, its underwriting policy or <strong>the</strong> status of its
reinsurers changes, or whenever a review is justified.
12.51 Where an insurer is part of a wider financial group, <strong>the</strong> Board of
Direc<strong>to</strong>rs should take note of <strong>the</strong> wider group’s reinsurance strategy
when determining its individual reinsurance strategy. The Board of <strong>the</strong>
individual entity should pay particular attention <strong>to</strong> intra-group
reinsurance arrangements that might give rise <strong>to</strong> concentration risks
for that particular individual undertaking which might also affect <strong>the</strong>
group situation as a whole.
12.52 The Senior Management shall notify <strong>the</strong> supervisory authority of any
intra-group financial reinsurance contracts.
12.53 The Senior Management shall define <strong>the</strong> policies and operational
procedures for implementing <strong>the</strong> reinsurance management strategy
approved by <strong>the</strong> Board of Direc<strong>to</strong>rs in unambiguous written form.
12.54 The Senior Management shall ensure that <strong>the</strong> terms and conditions of
<strong>the</strong> reinsurance contracts comply with <strong>the</strong> relevant legislation, that
reinsurance contracts represent <strong>the</strong> complete arrangement between
<strong>the</strong> cedant and <strong>the</strong> reinsurer, with interdependent contracts clearly
identified and no ‘side letters’, and that <strong>the</strong> contracts fully reflect all <strong>the</strong>
risks that are <strong>to</strong> be covered, in order <strong>to</strong> avoid situations with:
• inadequate reinsurance cover;
• unintentionally uncovered risks; and
• risks assumed <strong>to</strong> be covered by <strong>the</strong> contracts but which, for legal
115 This is in line with, e.g., requirements of many local GAAPs as well as with those of IFRS. See also ongoing
work in o<strong>the</strong>r areas, e.g.IAIS on Finite Reinsurance, Basel 2005, www.iaisweb.org.
116 See CEIOPS’ <strong>Answers</strong> <strong>to</strong> <strong>the</strong> <strong>European</strong> <strong>Commission</strong> <strong>to</strong> <strong>the</strong> first wave of Calls for Advice in <strong>the</strong> framework of
<strong>the</strong> Solvency II project, CEIOPS-DOC-03/05, para. 32, footnote 12.
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