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

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Content Introduction ................................................................................... 4 CEIOPS' Framework for <strong>Answers</strong> <strong>to</strong> <strong>the</strong> second wave of Calls for Advice .. 6 Technical provisions in life assurance ................................................. 9 Technical provisions in non-life insurance...........................................24 Safety measures ............................................................................52 Solvency capital requirement: <strong>the</strong> standard formula (life and non-life) ...80 Solvency capital requirement: internal models (life and non-life) and <strong>the</strong>ir validation .................................................................................... 113 Reinsurance (and o<strong>the</strong>r risk mitigation techniques) ........................... 135 Quantitative Impact Study and data related issues............................ 149 Powers of <strong>the</strong> supervisory authorities .............................................. 158 Solvency control levels.................................................................. 171 Fit and proper .............................................................................. 182 Peer review ................................................................................. 194 Group and cross-sec<strong>to</strong>ral issues ..................................................... 202 Annexes...................................................................................... 225 Annex A (Call for Advice No. 16).................................................. 225 Annex B (Call for Advice No. 10).................................................. 236 Annex C (Call for Advice No. 15).................................................. 260 Annex D (Call for Advice No. 12).................................................. 268 Annex E (Call for Advice No. 12) .................................................. 272 2
Style convention The following has been adopted for this document: Advice appears in shaded (blue) boxes, headed CEIOPS’ Advice Extracts from <strong>the</strong> Calls for Advice appear in unshaded (white) boxes, with text in italics Descriptive headings are used (such as 'Background', 'Explana<strong>to</strong>ry text' etc.) in an attempt <strong>to</strong> improve <strong>the</strong> navigability of <strong>the</strong> answers. 3
Page 1: CEIOPS-DOC-07/05 Answers</s
Page 5 and 6: • Safety measures (CfA 9); • So
Page 7 and 8: sole purpose is to
Page 9 and 10: Call for Advice No. 7 Technical pro
Page 11 and 12: one year). Therefore, capital requi
Page 13 and 14: perhaps through an explicit additio
Page 15 and 16: Discounting 7.22 The present value
Page 17 and 18: exposed to risk fr
Page 19 and 20: insurance liabilities set by refere
Page 21 and 22: Profit sharing In practice, for uni
Page 23 and 24: future cash flows will have <strong
Page 25 and 26: Explanatory text S
Page 27 and 28: always have resources to</s
Page 29 and 30: developed. They would help
Page 31 and 32: 8.28 A fourth option could be envis
Page 33 and 34: In principle, "the
Page 35 and 36: 8.48 Three alternatives can be cons
Page 37 and 38: essential part of the</stro
Page 39 and 40: statistical estimate (with a level
Page 41 and 42: 8.77 It may be argued that
Page 43 and 44: to use more sophis
Page 45 and 46: consequence on the
Page 47 and 48: 8.105 In some cases, the</s
Page 49 and 50: This shall be reviewed, at least an
Page 51 and 52: ut the exposure <s
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Explanatory text M
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9.15 Solvency II could also employ
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9.28 The life formula yields itself
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underestimate them
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'Prudent person plus' approach 9.52
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Uniform or different rules for tech
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through a prescribed list. Lists ar
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addition a range of stresses so tha
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(including the Rei
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for review of the
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eligibility criteria, or principles
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should not lead to
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• the degree of
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9.156 The senior management shall r
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- going-concern aspects of business
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features. 81 TailVaR is an example
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10.17 The SCR should also reflect <
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10.26 The risk of asset liability m
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Naturally, the pra
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too few categories
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- Choice of volume measures 10.57 W
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Underwriting risk in non-life insur
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volatility of thei
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those insurers this possible increa
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10.103 A factor-ba
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10.112 Assessing whethe</st
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10.121 The SCR should deliver a lev
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whenever its effects on the
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scenario techniques to</str
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Operational risk just ratings infor
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Call for Advice No. 11 Solvency cap
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Costs and Benefits 11.6 It should b
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• Qualitative requirements for <s
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11.19 Risk management criteria set
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individual undertaking is exposed a
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• sensitivity analyses that have
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• visualizations of flows of prod
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Partial models and the</str
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11.58 There should be few descripti
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of the SCR estimat
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equirements to imp
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Call for Advice No. 12 Reinsurance
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Reflection in technical provisions
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• provide an estimate of an under
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particular reinsurer(s)’ aggregat
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they auto<
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einsurer to <stron
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should be a reduction in risk regar
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Call for Advice No. 13 Quantitative
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• the process of
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• handling questions from insuran
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member countries and in the
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components of the
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Background 14.1 Current insurance D
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14.12 In order to
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groups in its answer to</st
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affected; • Impose restrictions o
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14.43 Regarding the</strong
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off all contracts; • to</
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Call for Advice No. 15 Solvency con
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Minimum capital requirement (MCR) D
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adjusted SCR. From a purely technic
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to be implemented.
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capital
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absolute floor (expressed in euros
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Bolkestein agreed to</stron
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16.14 Generally speaking, complianc
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appoint an additional person <stron
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16.28 It should also be noted that
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Time of application 16.41 The asses
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of the individual
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Background 17.1 This document aims
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Review Panel would be a permanent g
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• the developmen
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asis for considering improvements <
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(I) Regulatory arb
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(II) Capital requirements at group
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into a SCR at grou
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18.31 Additionally, it must be deci
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Capital requirements 18.39 The Fram
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(III) Supervisory Review Process of
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18.60 In view of the</stron
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new structure would need to
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future Framework Directive. CEIOPS
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18.94 Model validation in t
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the assumptions us
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Annexes Annex A (Call for Advice No
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pursuing a strategy which t
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Specific principles for non-life in
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Conformity, suitability and suffici
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• existence of significant insuff
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A.64 In the tests
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the rules on <stro
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TVaR1-α for Tail Value-at-risk. In
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Degree of personalisation B.24 Tran
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B.34 There are two approaches <stro
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Segmentation B.44 In general terms,
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technical technical technical techn
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B.61 The second alternative was cho
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Dutch supervisory authority for <st
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Market risk Equity risk this altern
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B.95 In a scenario-based approach,
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B.106 As an alternative one could t
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where: KTSA = the
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Results from the a
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Solvency ratio prior to</st
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Number of instances Risk group Deta
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Conclusion In general, the<
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where: TP gross = technical provisi
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premium risk, the
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“While proportional reinsurance t
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contribute with any additional info
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E.29 Another way <
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programmes on the
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