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

adjusted SCR. From a purely technical point of view, <strong>the</strong>re is only one
SCR and its breach should have <strong>the</strong> same consequences, whe<strong>the</strong>r it is
calculated using <strong>the</strong> standard formula, an internal model, or if it has <strong>to</strong>
be adjusted after <strong>the</strong> supervisor review process (Pillar II add-on).
Intervention by supervisors
15.16 If an undertaking does not meet <strong>the</strong> SCR, supervisory action will be
triggered in an attempt <strong>to</strong> remedy <strong>the</strong> situation.
15.17 The <strong>Commission</strong> Services have initially suggested that <strong>the</strong> SCR
threshold should be linked with an obligation on <strong>the</strong> part of <strong>the</strong>
supervisor <strong>to</strong> carry out (by a given deadline) a more detailed
assessment of <strong>the</strong> undertaking's situation (by way of on-site
inspections or additional requests for information, for example). The
supervisor would also enter in<strong>to</strong> a dialogue with <strong>the</strong> undertaking on <strong>the</strong>
planned measures and timetable for res<strong>to</strong>ring <strong>the</strong> target level of
capital. A report on this dialogue could be sent <strong>to</strong> <strong>the</strong> supervisory
authorities in those Member States where <strong>the</strong> undertaking has
commitments, <strong>the</strong>reby helping <strong>to</strong> promote mutual recognition of
supervision and <strong>to</strong> spell out more tangibly <strong>the</strong> level of supervision
associated with <strong>the</strong> target level of capital.
Special case: MCR ≈ SCR
15.18 Generally, breaching <strong>the</strong> SCR triggers flexible supervisory action,
depending on <strong>the</strong> causes of <strong>the</strong> breach and <strong>the</strong> probability of
correction. Breaching <strong>the</strong> MCR triggers firm supervisory action that may
even lead <strong>to</strong> <strong>the</strong> withdrawal of permission <strong>to</strong> stay in business. As noted
above, <strong>the</strong> SCR may come close <strong>to</strong> or even equal <strong>the</strong> MCR. This
particular case must be discussed in more detail when CEIOPS has
decided on a formula for <strong>the</strong> calculation of <strong>the</strong> MCR and <strong>the</strong> SCR. (see
also answer <strong>to</strong> CfA 9, para. 9.51).
Additional control levels
Purpose: Coverage of technical provisions (and, in future, <strong>the</strong> SCR) by admissible
assets
15.19 The technical provisions' safety level is, in <strong>the</strong> first instance, derived
from <strong>the</strong> fact that <strong>the</strong> provisions must be sufficient <strong>to</strong> meet future
commitments.
15.20 The risk margin for technical provisions may be set at a level which
would allow a transfer of liabilities at any point of time. Therefore it
seems appropriate that <strong>the</strong> coverage of technical provisions by
admissible assets is reflected in a separate control level, although it is
clear this is not an explicit solvency control level (see CEIOPS’ Advice:
'Supervisory Ladder', Additional control measure).
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