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

<strong>the</strong>refore not feasible <strong>to</strong> ask <strong>the</strong> insurance undertakings <strong>to</strong> conduct QIS
calculations during <strong>the</strong> first 3 months of a year.
13.24 According <strong>to</strong> <strong>the</strong> current version of <strong>the</strong> Solvency II Roadmap (Annex <strong>to</strong>
MARKT/2502/05-rev. 1) <strong>the</strong> <strong>European</strong> <strong>Commission</strong> will conduct an
impact assessment <strong>to</strong> be presented July 2007 . CEIOPS will contribute
<strong>to</strong> this impact assessment by providing greater clarity on <strong>the</strong> implicit
prudence embedded in <strong>the</strong> current level of technical provisions,
<strong>to</strong>ge<strong>the</strong>r with assessing <strong>the</strong> impact of its advice on technical provisions
and capital requirements under Solvency II. To this extent, it will
organize a limited QIS1 exercise during <strong>the</strong> fourth quarter of 2005 that
will be primarily focussed on testing <strong>the</strong> various confidence levels with
respect <strong>to</strong> <strong>the</strong> determination of <strong>the</strong> proposed risk margin surrounding
<strong>the</strong> best estimate of <strong>the</strong> insurers’ liabilities. From <strong>the</strong> PFS <strong>the</strong> valuation
of insurance liabilities appeared <strong>to</strong> be one of <strong>the</strong> central elements when
striving for greater harmonisation of prudence levels requested under
Solvency II. In this context, QIS 1 will test <strong>the</strong> 75 th and 90 th percentile,
as well as inviting firms <strong>to</strong> bring <strong>the</strong> 60 th percentile and/or alternative
approaches (such as <strong>the</strong> cost of capital approach) <strong>to</strong> CEIOPS' attention.
Simultaneously, <strong>the</strong> Pillar I Working Group will work on fur<strong>the</strong>r
refinements of <strong>the</strong> MCR and SCR formulas, which would allow <strong>the</strong>
CEIOPS FSC <strong>to</strong> conduct its first full-blown QIS (QIS2) exercise e.g. on
technical provisions, MCR and SCR during <strong>the</strong> second quarter of 2006.
CEIOPS envisages that <strong>the</strong>re will still be different options for technical
provisions <strong>to</strong> be tested under QIS2.
Planning for progressively more sophisticated and comprehensive
approaches <strong>to</strong> field testing.
13.25 Throughout <strong>the</strong> entire Solvency II project (e.g. up <strong>to</strong> and beyond <strong>the</strong>
presentation of <strong>the</strong> Directive in July 2007) a series of QIS is foreseen.
The QIS process will thus have several iterations with progressively
more sophisticated and comprehensive approaches. Input for more
sophisticated assumptions <strong>to</strong> be included in <strong>the</strong> subsequent QIS will
come as progress is achieved by <strong>the</strong> Solvency II Working Groups. Aside
from <strong>the</strong> impact of <strong>the</strong> minimum and solvency capital requirements on
<strong>European</strong> insurance undertakings, CEIOPS may contribute <strong>to</strong> <strong>the</strong> EU
<strong>Commission</strong>'s Impact Assessment by addressing broader economic
consequences of <strong>the</strong> overall Solvency II project as well as cost-benefit
analyses of all waves under work.
CEIOPS' Advice
13.26 QIS will test <strong>the</strong> impact of proposed principles with respect <strong>to</strong> <strong>the</strong>
financial resources of individual insurance undertakings. As <strong>the</strong> QIS is
very challenging from a technical, resource and timing point of view, it
will require careful planning and effective execution.
13.27 The QIS process is expected <strong>to</strong> have several iterations with
progressively more sophisticated and comprehensive approaches as
quantitative requirements are developed in more detail (e.g., fur<strong>the</strong>r
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