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

undertakings <strong>the</strong>mselves being permitted <strong>to</strong> do <strong>the</strong> required things,
which, in turn, depends on <strong>the</strong> actions permitted by corporate
legislation in each Member State. The corporate law in some States, for
instance, permits undertakings <strong>to</strong> propose compromises with <strong>the</strong>ir
credi<strong>to</strong>rs with <strong>the</strong> result that if a certain majority of credi<strong>to</strong>rs agrees,
<strong>the</strong> proposals are binding for all credi<strong>to</strong>rs. This can be a useful
restructuring <strong>to</strong>ol if an insurance undertaking is in financial difficulties
and <strong>the</strong> optimum solution is for policyholders <strong>to</strong> agree <strong>to</strong> be paid less
than <strong>the</strong> full value of <strong>the</strong>ir insurance policy. So, whilst supervisors can
urge insurers <strong>to</strong> propose such compromises in some States, turning
that <strong>to</strong> a general 'power' throughout <strong>the</strong> EU is not possible as it would
not be feasible in o<strong>the</strong>r States where company law does not enable
insurers <strong>to</strong> propose such compromises. The <strong>Commission</strong> may wish <strong>to</strong>
consider <strong>the</strong> extent <strong>to</strong> which such powers should be harmonised where
changes would be required <strong>to</strong> company law in <strong>the</strong> Community.
14.8 In general, CEIOPS aims for a high level of convergence. In order <strong>to</strong>
avoid supervisory arbitrage, Member States should be provided with a
common set of supervisory powers, based on <strong>the</strong> existing powers that
have been appropriately reviewed, refined and extended <strong>to</strong> cover new
powers. Supervisory powers should in general be exercised in
accordance with all laws applicable <strong>to</strong> an insurance undertaking,
including national and international data protection laws and company
laws.
14.9 Should additional powers be granted <strong>to</strong> supervisory authorities,
Member States should not be forced <strong>to</strong> abolish <strong>the</strong>ir existing additional
powers if this compromises <strong>the</strong> attainment of <strong>the</strong>ir national supervisory
objectives, which should be compatible with <strong>the</strong> aim of Solvency II
creating an appropriately harmonised framework.
14.10 CEIOPS notes that as a part of <strong>the</strong> Supervisory Review Process
competent authorities are expected <strong>to</strong> assess <strong>the</strong> risk profiles of a large
number of undertakings using <strong>the</strong> SCR standard model. In this respect
<strong>the</strong> future Solvency II Framework is likely <strong>to</strong> put additional demands on
<strong>the</strong> resources of supervisory authorities.
14.11 The new framework will establish a number of new requirements of <strong>the</strong>
undertakings (i.e. CfA 1 on risk management and internal control).
Similarly, a risk-based approach <strong>to</strong> supervision entails that supervisory
authorities, in fulfilling <strong>the</strong>ir obligations <strong>to</strong> conduct both legal and
financial supervision (on-site as well as off-site) must cover a greater
number of issues than under <strong>the</strong> current regime. Article 10 of <strong>the</strong>
Recast Life Directive establishes that financial supervision shall include
verification, across <strong>the</strong> entire scope of <strong>the</strong> assurance undertaking’s
business, of its state of solvency, of <strong>the</strong> establishment of technical
provisions, including ma<strong>the</strong>matical provisions, and of <strong>the</strong> assets
covering <strong>the</strong>m, in accordance with <strong>the</strong> rules laid down or practices
followed in <strong>the</strong> home Member State pursuant <strong>to</strong> <strong>the</strong> provisions adopted
at Community level. However, Article 10 only addresses <strong>the</strong> financial
supervision ra<strong>the</strong>r than <strong>the</strong> legal supervision. Hence, it is necessary
that <strong>the</strong> future Framework Directive includes provisions covering both
financial and legal supervision.
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