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

through a prescribed list. Lists are sometimes also easy <strong>to</strong> circumvent
via asset transformation.
9.79 On <strong>the</strong> o<strong>the</strong>r hand, a list gives less room for interpretation than broad
principles, providing a more objective and enforceable safety net than
principles alone.
9.80 A combined approach is suggested <strong>to</strong> retain <strong>the</strong> advantages of both
principles and lists. In a combined approach, <strong>to</strong> be eligible, an asset
must be both listed as eligible and meet <strong>the</strong> principles. One possible
way <strong>to</strong> achieve this is <strong>to</strong> determine principles at <strong>the</strong> directive level,
whereas a list of potentially eligible asset classes could be specified in
implementing measures.
9.81 Under ei<strong>the</strong>r a principles-based or list-based approach, asset eligibility
could be considered:
• positively: setting out <strong>the</strong> universe of what is eligible (e.g.
anything that meets a set of principles, or any asset that is listed
is eligible; everything else is not); or
• negatively: a prescribed list of assets or anything with particular
characteristics is defined as being ineligible; everything else is
eligible.
9.82 Under a positive list-based approach, market innovations au<strong>to</strong>matically
become ineligible when <strong>the</strong>y appear, whereas in a negative list-based
approach <strong>the</strong>y are eligible until <strong>the</strong> list is updated.
Criteria for eligibility and for updating <strong>the</strong> list of eligible assets
9.83 In IAIS’s Corners<strong>to</strong>nes for Assessment of Insurers’ Solvency dated
11 February 2005, Corners<strong>to</strong>ne V states that:
"The [solvency] regime should require as a minimum that sufficient
assets are available <strong>to</strong> cover <strong>the</strong> technical provisions and o<strong>the</strong>r
liabilities."
Future IAIS standards on assets covering <strong>the</strong> technical provisions
should be considered as a starting point for determining asset
eligibility.
9.84 Where <strong>the</strong>re is a very active market, <strong>the</strong> assets would au<strong>to</strong>matically
meet any criterion on realisability. But o<strong>the</strong>r assets would take longer
<strong>to</strong> realise, for instance property assets might take 6 months <strong>to</strong> a year.
It may not always be possible <strong>to</strong> sell debts <strong>to</strong> third parties and in such
cases <strong>the</strong> debt would have <strong>to</strong> be retained <strong>to</strong> maturity. As ano<strong>the</strong>r
example, assets acquired for <strong>the</strong> purpose of <strong>the</strong> insurance business
(e.g. furniture and fittings, office equipment or property occupied by
<strong>the</strong> insurer) might be retained and written off (expensed) over <strong>the</strong>ir
useful life (where market value is used <strong>the</strong> expense is <strong>the</strong> decline in
market value): some items in this category should be regarded only as
having value <strong>to</strong> <strong>the</strong> extent that <strong>the</strong>y can be used in meeting existing
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