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

sole purpose is <strong>to</strong> punish non-compliance. Hence, according <strong>to</strong> <strong>the</strong>
principle of subsidiarity, such sanctions should not be subject <strong>to</strong>
<strong>European</strong> legislation (although <strong>the</strong>y may be a part of national
legislation).
17. The answers do not elaborate on <strong>the</strong> objective of supervision. In
Schedule 1: Solvency II – List of Work Areas and Timing for Calls of
Advice 6 , <strong>the</strong> <strong>Commission</strong> Services have indicated that "existing analysis
of <strong>the</strong> objective of supervision is now sufficient for preparation of a
draft Article in <strong>the</strong> Framework Directive".
18. In addition <strong>to</strong> appropriate inclusion in <strong>the</strong> Directive, supervision should,
in level 2 regulation, include <strong>the</strong> exercise of sound judgement in
identifying and evaluating risks of insurance undertakings, as well as
<strong>the</strong> level and frequency of supervisory scrutiny. This will depend on <strong>the</strong>
systemic importance, nature, scale and complexity of <strong>the</strong> activities of
each insurance undertaking. Effective supervision requires that
supervisory authorities should, based on regulation at <strong>the</strong> appropriate
level, have in place adequate powers, legal protection and financial
resources <strong>to</strong> exercise <strong>the</strong>ir functions and powers. They should also be
operationally independent and accountable in <strong>the</strong> exercise of those
functions and powers. In addition, <strong>the</strong>y should hire, train and maintain
staff with sufficiently high professional standards.
19. The <strong>Commission</strong> Services have indicated that <strong>the</strong> solvency system
defined in a broader sense should take its starting point in a
three-pillar structure inspired by Basel II: quantitative requirements
(Pillar I), supervisory activities (Pillar II) and supervisory reporting and
public disclosure (Pillar III). This implies that special considerations are
made concerning <strong>the</strong> interaction between <strong>the</strong> different pillars of
quantitative and qualitative supervision, as well as <strong>to</strong> <strong>the</strong> role of
disclosure.
20. CEIOPS recognises that sound market conduct policies and procedures
are a key part of <strong>the</strong> risk management of an insurer, and that <strong>the</strong> lack
of good conduct may have an adverse impact on <strong>the</strong> risk profile of an
insurance undertaking. This, in turn, may affect <strong>the</strong> solvency of <strong>the</strong>
undertaking. However, <strong>the</strong>se answers do not explicitly address conduct
of business issues. This does not imply that supervisors in Member
States will not include compliance with conduct of business regulation
in <strong>the</strong>ir supervisory activities.
21. CEIOPS uses <strong>the</strong> term 'actuarial' <strong>to</strong> describe a function applying
statistical-ma<strong>the</strong>matical methods developed for use in insurance
undertakings. It is not CEIOPS’ intention <strong>to</strong> specify <strong>the</strong> use of
professional actuaries.
22. The answers <strong>to</strong> CfAs 7 <strong>to</strong> 17 apply <strong>to</strong> solo supervision. Although <strong>the</strong>y
may also be relevant <strong>to</strong> <strong>the</strong> supervision of groups, matters relating <strong>to</strong>
supervision of groups and financial conglomerates are discussed in
CfA 18.
6 Available on EU <strong>Commission</strong> website: http://europa.eu.int/.
7