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

with <strong>the</strong> two measures above or independent of <strong>the</strong>m, <strong>to</strong> instruct
undertakings <strong>to</strong> set up and implement partial or full internal models if
<strong>the</strong> actual risk situation deviates substantially from <strong>the</strong> assumptions
underlying <strong>the</strong> standard formula. This particular power should be used
with particular care.
14.32 Supervisors should have <strong>the</strong> power <strong>to</strong> ei<strong>the</strong>r reject <strong>the</strong> actuarial
model, require improvement or require <strong>the</strong> undertaking <strong>to</strong> calculate
and apply a recalibration fac<strong>to</strong>r. CEIOPS will consider whe<strong>the</strong>r and how
such a recalibration fac<strong>to</strong>r could be estimated in a reliable and
consistent manner. Increase an undertaking's SCR estimate
mechanistically using a recalibration fac<strong>to</strong>r <strong>to</strong> ensure it is consistent
with <strong>the</strong> prudential objectives for <strong>the</strong> SCR under Pillar I. Supervisors
may also impose a period of 'parallel running' <strong>to</strong> compare <strong>the</strong> results
generated by <strong>the</strong> internal model with <strong>the</strong> standard formula. A
descending floor might be used <strong>to</strong> ensure that <strong>the</strong> transition <strong>to</strong> internal
models for <strong>the</strong> SCR calculation does not result in sudden, extreme
changes in regula<strong>to</strong>ry requirements.
14.33 If <strong>the</strong>re is reason <strong>to</strong> believe that <strong>the</strong> solvency position is in jeopardy,
supervisory authorities should have <strong>the</strong> power <strong>to</strong> take preventive
measures, in concordance with <strong>the</strong> solvency control levels.
14.34 The 'preventive measures <strong>to</strong>olkit' available <strong>to</strong> supervisors (see also
CfA 15) should at least include <strong>the</strong> following general powers, some of
which are already included in <strong>the</strong> acquis:
• require <strong>the</strong> insurer <strong>to</strong> develop an acceptable plan for correcting
problems (corrective plans include agreed and acceptable steps
<strong>to</strong> be taken <strong>to</strong> resolve <strong>the</strong> issues raised within an agreed
timetable);
• require that technical provisions be increased or/and provisioning
procedures be revised;
• refuse, delay or impose conditions on requests or applications
submitted for regula<strong>to</strong>ry approval, such as innovative capital
instruments, acquisitions and redemptions, or <strong>the</strong> repurchase of
equity;
• limit business expansion (premium volume limitations);
• restrict asset transfers;
• restrict an insurer’s purchase of its own shares and restrict
payments or asset transfers <strong>to</strong> an insurer’s subsidiary;
• initiate action <strong>to</strong> restrict ownership or activities of a subsidiary
where, in <strong>the</strong> opinion of <strong>the</strong> supervisor, such activities jeopardise
<strong>the</strong> financial situation of <strong>the</strong> insurer;
• prevent <strong>the</strong> insurer from issuing new policies or accepting new
business within existing policies, provided that contractual
obligations <strong>to</strong> <strong>the</strong> policyholder <strong>to</strong> accept such business are not
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