The European Insurance and Occupational Pensions Authority (EIOPA), a European Union (EU) regulatory institution, has made important contributions to the financial stability of the re/insurance sector but continues to face significant challenges, according to the European Court of Auditors (ECA).
A new report by the ECA said that the Authority, along with national supervisors and legislators, must address issues related to more robust oversight of cross-border re/insurance business, supervision of the internal models used by re/insurance companies and EIOPA’s own governance.
EIOPA was established in 2011 as part of a reform following the 2008 financial crisis, and is responsible for ensuring high-quality, effective and consistent supervision of the pensions and re/insurance sector across the EU.
Along with other European Supervisory Authorities (ESAs), the EIOPA’s institutional framework and mandate are currently subject to a comprehensive review by the European Commission, the European Parliament and the Council.
“European Supervisory Authorities are key to avoiding any failure in financial markets that could negatively affect the real economy and consumers’ well-being”, said Rimantas Šadžius, the Member of the European Court of Auditors responsible for the report.
“It is therefore essential that the ongoing review of legislation takes into account the lessons learnt from our scrutiny of EIOPA,” he continued, “in particular concerning the adequacy of its resources and its governance, and its co-operation with national authorities to ensure proper supervision of cross-border business”.
The auditors found that EIOPA uses sound analysis to ensure consistent supervision among national authorities, but noted that it was encountering systemic weaknesses in its supervision of cross-border re/insurance business.
Currently, legislation and practice do not ensure the same level of supervision, transparency and protection for all EU consumers.
Additionally, the ECA reported that EIOPA faces considerable problems related to its governance and resources, as national authorities do not always provide sufficient support for its actions and also play a decisive role in its main governing body, which may compromise the Authority’s independence.
The report concluded by recommending that EIOPA should better focus its supervisory tools, address systemic weaknesses in supervision of cross-border companies and limitation on access to information, improve the design of its stress test scenarios, and increase the number of staff assigned to supervisory tasks.
