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

liabilities, o<strong>the</strong>rs may have a residual value (in particular property
owned by <strong>the</strong> insurer which may be sold, ei<strong>the</strong>r after <strong>the</strong> insurer has
moved <strong>to</strong> o<strong>the</strong>r offices or with it as a sitting tenant – i.e. sale and
leaseback).
9.85 Specific attention must be directed <strong>to</strong> possible local classes. Therefore
views from stakeholders in all countries are important, so that a local
class that would meet <strong>the</strong> principles is not excluded.
Limits on concentrations in covering assets and diversification
requirements
Interplay with <strong>the</strong> SCR
9.86 Quantitative rules should be regarded as a necessary safety net <strong>to</strong> help
prevent that <strong>the</strong> insurer manages its assets and liabilities
inappropriately. Clearly, limits alone would not be sufficient <strong>to</strong> achieve
this purpose, but this does not speak against using <strong>the</strong>m. Ra<strong>the</strong>r, such
limits will help <strong>to</strong> contribute, <strong>to</strong>ge<strong>the</strong>r with <strong>the</strong> SCR and Pillar II
measures, <strong>to</strong> CEIOPS’ supervisory objectives within a 'prudent person
plus' approach. It is also conceivable that Solvency II could move
dynamically from <strong>the</strong> present safety nets <strong>to</strong>wards more reliance on <strong>the</strong>
SCR in later stages.
9.87 CEIOPS needs <strong>to</strong> identify those points where limits would be necessary
<strong>to</strong> supplement <strong>the</strong> SCR.
9.88 The SCR will deal with credit and market risk so <strong>the</strong>y are not discussed
fur<strong>the</strong>r in this context. Exposures <strong>to</strong> individual assets and
counterparties would also be covered in <strong>the</strong> SCR <strong>to</strong> <strong>the</strong> extent possible.
9.89 Exposures <strong>to</strong> a single industry or <strong>to</strong> a limited geographical area could
be addressed through a more complicated formula, at a degree of
complexity that might be considered not justified. A possible way <strong>to</strong>
deal with this kind of concentration is via Pillar II.
9.90 Fur<strong>the</strong>rmore, due <strong>to</strong> <strong>the</strong> nature of concentration and liquidity risks, it is
likely that Pillar I requirements on <strong>the</strong>se risks will be supported by <strong>the</strong>
SRP.
Limits on exposures <strong>to</strong> single counterparties
9.91 CEIOPS notes that an insurer's solvency may be dependent on a single
counterparty. CEIOPS <strong>the</strong>refore considers that <strong>the</strong> <strong>to</strong>tal exposure of an
insurer <strong>to</strong> any single counterparty or group of closely related
counterparties (such as all <strong>the</strong> companies in a group) should not
exceed <strong>the</strong> insurer's capital. 68 This could be extended <strong>to</strong> cover in
68 That is <strong>the</strong> excess of <strong>the</strong> value of eligible assets (see for instance 9.97-9.109 and 9.138) over <strong>the</strong> value of
liabilities (o<strong>the</strong>r than those liabilities, such as subordinated debt within limits,that can count as capital).
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