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

affected;
• Impose restrictions on certain types of business or investment;
• Impose restrictions on acquisitions;and
• Review reinsurance arrangements.
14.35 If <strong>the</strong> solvency capital is identified by <strong>the</strong> supervisory authority as
being insufficient, <strong>the</strong> authority should be empowered <strong>to</strong> request <strong>the</strong>
undertaking <strong>to</strong> directly address <strong>the</strong> problem and <strong>to</strong> immediately
execute any measures deemed necessary by <strong>the</strong> supervisor. This could
be done by:
• requesting <strong>the</strong> undertaking <strong>to</strong> res<strong>to</strong>re capital <strong>to</strong> adequate levels
and <strong>to</strong> submit a revised business plan for res<strong>to</strong>ring solvency
levels;
• inhibiting <strong>the</strong> undertaking from assuming any new risk of any
kind;
• limiting <strong>the</strong> redemption/repurchase of equity instruments; and
• limiting dividend payments, depending on <strong>the</strong> level of solvency
control that is breached.
14.36 In order <strong>to</strong> evaluate <strong>the</strong> effectiveness of <strong>the</strong> stress tests performed by
<strong>the</strong> undertaking, supervisory authorities should have <strong>the</strong> power <strong>to</strong>:
• request <strong>the</strong> results from key stress tests and <strong>the</strong> underlying
critical assumptions;
• access full details of <strong>the</strong> assumptions and methodologies used by
<strong>the</strong> insurer in stress testing; and
• assess <strong>the</strong> insurers’ response if stress-testing results indicate an
increased risk profile.
14.37 Supervisory authorities should also have <strong>the</strong> power <strong>to</strong>:
• prescribe standard tests that support <strong>the</strong> supervisor in
benchmarking and comparative analyses, enabling <strong>the</strong>
supervisor <strong>to</strong> quickly identify which insurers are likely <strong>to</strong> be
affected by a major risk event, such as a natural disaster or <strong>the</strong>
failure of a major reinsurer;
• require <strong>the</strong> insurer <strong>to</strong> perform additional stress-testing, <strong>to</strong>
provide both <strong>the</strong> insurer and <strong>the</strong> supervisor with a more
complete understanding of <strong>the</strong> situation; and
• establish <strong>the</strong> requirements for stress-testing <strong>to</strong> ensure prudent
risk management by <strong>the</strong> insurer, e.g. <strong>the</strong> nature and minimum
frequency of such tests.
14.38 Supervisory authorities should have <strong>the</strong> power <strong>to</strong> impose fur<strong>the</strong>r
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