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

• <strong>the</strong> process of conducting a QIS and processing a result is
estimated <strong>to</strong> take approximately 5 <strong>to</strong> 6 months from <strong>the</strong> point in
time where all necessary input is received; and
• <strong>the</strong> Prepara<strong>to</strong>ry Field Study (PFS) which has been carried out in
<strong>the</strong> first half of 2005 on selected life insurance undertakings is not
representative for <strong>the</strong> QIS.
13.5 This response describes <strong>the</strong> preparations made for conducting QIS of
<strong>the</strong> Solvency II proposals. CEIOPS has identified <strong>the</strong> following areas as
important <strong>to</strong> incorporate in <strong>the</strong> plan for <strong>the</strong> first round of QIS:
• experience from <strong>the</strong> PFS;
• organisation of work;
• scope, data and scenario analysis;
• sample sizes;
• timing issues; and
• planning for progressively more sophisticated and comprehensive
approaches <strong>to</strong> field testing.
13.6 The challenges from a technical, resource and timing point of view will
be considered in this response. The response primarily focuses on <strong>the</strong>
responsibilities of <strong>the</strong> CEIOPS FSC in carrying out <strong>the</strong> QIS. It does not
deal with <strong>the</strong> methodological issues related <strong>to</strong> <strong>the</strong> content of <strong>the</strong>
solvency proposals, but is based on <strong>the</strong> assumption that all necessary
input for developing a testable framework will be provided by <strong>the</strong>
Solvency II Working Groups, especially <strong>the</strong> Pillar I Working Group,
consistent with <strong>the</strong> answers of CfAs 7-10.
Experience from <strong>the</strong> PFS
13.7 During spring 2005 CEIOPS conducted a PFS on selected life insurance
undertakings. The following results can be noted. First, <strong>the</strong> PFS
resulted in an extensive list of practical issues with respect <strong>to</strong> realistic
valuation as well as o<strong>the</strong>r issues, which list will be considered by
CEIOPS in its fur<strong>the</strong>r technical work. Guidance with respect <strong>to</strong> market
consistent valuation of assets and, in particular, liabilities, seems
urgent. With respect <strong>to</strong> quantitative issues, <strong>the</strong> following results can be
derived. First, transition from current <strong>to</strong> market consistent valuation
may generally lead <strong>to</strong> a slight reduction of liabilities; however <strong>the</strong>re is a
large dispersion between countries and undertakings. It should
however be noted that in most cases no risk margin had been included
yet. It was also noted that embedded options have been taken in<strong>to</strong>
account by only a few undertakings, yet an increasing tendency <strong>to</strong>
value <strong>the</strong>m can be perceived. Moreover it turned out that some
countries do not value <strong>the</strong>ir assets in a market consistent way. In <strong>the</strong>se
151