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

18.91 The absence of full consolidated supervision for insurance groups raises
a number of challenges for insurance supervisors when it comes <strong>to</strong>
validation or approval of <strong>the</strong> aforementioned models. For example,
<strong>the</strong>re is currently no legally charged supervisor who is responsible for
supervision at group level. Ra<strong>the</strong>r <strong>the</strong>re is a sharing of <strong>the</strong>se
responsibilities amongst all <strong>the</strong> supervisors of <strong>the</strong> group's entities. This
would suggest that <strong>the</strong> proposed solution in <strong>the</strong> banking sec<strong>to</strong>r i.e. that
<strong>the</strong> consolidating supervisor will have <strong>the</strong> final say in model validation,
will not work in <strong>the</strong> insurance sec<strong>to</strong>r. 143 Moreover, it is stated in <strong>the</strong>
Solvency II framework that solo supervision remains <strong>the</strong> bedrock of
insurance supervision. This means that each supervisor will need <strong>to</strong> be
satisfied not only in relation <strong>to</strong> <strong>the</strong> way <strong>the</strong> model works in practice,
but also, and in particular, in relation <strong>to</strong> <strong>the</strong> relevance of <strong>the</strong> model for
those insurance undertakings that fall within <strong>the</strong>ir Member State and
<strong>the</strong> ability of that specific company <strong>to</strong> be able <strong>to</strong> use <strong>the</strong> model both in
terms of skill and data requirements.
18.92 The <strong>Commission</strong> foresees 144 a review of <strong>the</strong> current system of
supervision of insurance groups, and CEIOPS shares <strong>the</strong> opinion that an
approach <strong>to</strong>wards <strong>the</strong> system recognised in <strong>the</strong> FCD would be a step
forward. It would imply a series of changes, namely providing <strong>the</strong>
group supervisor with additional competences and responsibilities.
However, this approach needs <strong>to</strong> be compatible with <strong>the</strong> stated aim of
<strong>the</strong> <strong>Commission</strong> of building <strong>the</strong> future solvency framework with solo
supervision being <strong>the</strong> corners<strong>to</strong>ne of <strong>the</strong> whole supervisory system, <strong>to</strong>
emphasise <strong>the</strong> continued core role of <strong>the</strong> solo supervisor.
18.93 Also, <strong>the</strong> EU <strong>Commission</strong> should bear in mind <strong>the</strong> potential complexity
of modelling risks in insurance, due <strong>to</strong> both <strong>the</strong> lack of past experience
and <strong>the</strong> underlying difficulties of insurance risk (underwriting, long time
horizon…etc.), where up <strong>to</strong> date no generally agreed model has been
developed.
143
On <strong>the</strong> o<strong>the</strong>r hand, strong compelling reasons has been expressed <strong>to</strong> follow <strong>the</strong> proposed Article 129 of
CRD.
CRD Art. 129:
1. The competent authority responsible for <strong>the</strong> exercise of supervision on a consolidated basis of EU parent
credit institutions and credit institutions controlled by EU parent financial holding companies shall carry out
<strong>the</strong> following tasks: (a) supervisory overview and assessment of compliance with <strong>the</strong> requirements laid
down in Articles 71, 72(2), 72(2) and 73(3); (b) coordination of ga<strong>the</strong>ring and dissemination of relevant or
essential information in going concern and emergency situations; (c) planning and coordination of
supervisory activities in going concern as well as in emergency situations, including in relation <strong>to</strong> <strong>the</strong>
activities in Article 124, in cooperation with <strong>the</strong> competent authorities involved, and in relation <strong>to</strong> Articles
43 and 141.
2. In <strong>the</strong> case of applications for <strong>the</strong> permission referred <strong>to</strong> in Articles 84(1), 87(9) and 105, respectively,
submitted by an EU parent credit institution and its subsidiaries, or jointly by <strong>the</strong> subsidiaries of an EU
parent financial holding company, <strong>the</strong> competent authorities shall work <strong>to</strong>ge<strong>the</strong>r, in full consultation, <strong>to</strong>
determine whe<strong>the</strong>r or not <strong>to</strong> grant <strong>the</strong> permission sought and <strong>to</strong> determine <strong>the</strong> terms and conditions, if
any, <strong>to</strong> which such permission should be subject. An application as referred <strong>to</strong> in <strong>the</strong> first subparagraph
shall be submitted only <strong>to</strong> <strong>the</strong> competent authority referred <strong>to</strong> in paragraph 1. The competent authorities
shall in single document agree <strong>to</strong>ge<strong>the</strong>r, within no more than six months, <strong>the</strong>ir determination on <strong>the</strong>
application. This document shall be provided <strong>to</strong> <strong>the</strong> applicant. In <strong>the</strong> absence of a determination within six
months, <strong>the</strong> competent authority referred <strong>to</strong> in paragraph 1 shall make its own determination on <strong>the</strong>
application.
144 MARKT/2505/05-EN, page 2, Group Issues: ¨<strong>the</strong> allocation of responsibilities of supervisors involved in
group supervision needs <strong>to</strong> be reviewed, in particular in connection with <strong>the</strong> use of internal models¨.
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