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

Conclusion
In general, <strong>the</strong>re was no main single cause of <strong>the</strong> actual failures, in contrast <strong>to</strong>
<strong>the</strong> findings of <strong>the</strong> Sharma report for failures 1996-2001, where it was concluded
that management represented <strong>the</strong> main cause. Referring <strong>to</strong> life insurance
companies, <strong>the</strong> difficulty that was mentioned most often over recent years was
<strong>the</strong> depreciation of investments due <strong>to</strong> <strong>the</strong> downturn on <strong>the</strong> capital markets that
spanned <strong>the</strong> period of <strong>the</strong> survey.
The survey indicates that no single cause led <strong>to</strong> bankruptcy or o<strong>the</strong>r failures, but
instead identified a number of different risk categories. In this context, it is
obvious that only an enterprise-wide risk management policy that takes all <strong>the</strong>
different risks in<strong>to</strong> account represents appropriate coverage. Thus, <strong>the</strong> emphasis
which CEIOPS is currently placing on an enterprise-wide approach within
Solvency II is very important.
With regard <strong>to</strong> <strong>the</strong> concrete levels of <strong>the</strong> future solvency system, <strong>the</strong> survey
identified that <strong>the</strong> 150% of current solvency ratio represents a critical level, and
that breaching <strong>the</strong> 150% could serve as a solvency control level triggering
intensified supervision, since most failures occur when entities breach <strong>the</strong> 150 %
of solvency ratio. With regard <strong>to</strong> <strong>the</strong> MCR, CEIOPS proposes that a percentage
such as <strong>the</strong> 150% solvency ratio should trigger extraordinary supervisory
intervention. It may also be necessary <strong>to</strong> take <strong>the</strong> relationship between MCR and
SCR in<strong>to</strong> account, since 150% of <strong>the</strong> MCR could already be above <strong>the</strong> SCR. The
actuarial percentage would need <strong>to</strong> be assessed <strong>to</strong> take in<strong>to</strong> consideration
changes in <strong>the</strong> determination of asset values, liability values (including technical
provisions0 and <strong>the</strong> impact of <strong>the</strong>se changes on <strong>the</strong> MCR.
With regard <strong>to</strong> <strong>the</strong> SCR, <strong>the</strong> survey does not provide any answers on new
solvency control levels, since <strong>the</strong> existing solvency ratio is considered <strong>to</strong> be <strong>to</strong>o
different from <strong>the</strong> SCR (<strong>to</strong>o risk-insensitive).
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