Insurance Europe, the European re/insurance federation, has expressed “serious concerns’’ in its consultation response, about the European Insurance and Occupational Pensions Authority (EIOPA)’s supervision of reinsurance plans.
These concerns are regarding the Authority’s draft Supervisory Statement (Statement) on the supervision of reinsurance concluded with third countries re/insurance undertakings.
EIOPA announced the launch of a public consultation on its supervisory statement back in July 2023, which closed on 10 October 2023.
The Statement sets out supervisory expectations in several areas, including the assessment of the business context when using reinsurance from third countries and the importance of an early supervisory dialogue.
Furthermore, it includes supervisory considerations on how to assess reinsurance agreements and undertakings’ risk management systems in relation to the use of third-country reinsurers. The draft supervisory statement also foresees tools that will help to mitigate any additional risks that might arise.
Insurance Europe has expressed a number of concerns regarding the Statement, which include clarity of objectives, its legal framework and consistency and clarity of EIOPA’s approach.
Regarding clarity of objectives, scope and nature of the document, Insurance Europe noted that it is unclear what problem EIOPA is aiming to address.
Stating: “The federation further argues that the choice of a Statement is disproportionate and overreaching, and using an alternative tool, such as a supervisory handbook, would be more appropriate.”
The Statement, Insurance Europe further noted, imposes conservative expectations and additional burdens on National Competent Authorities (NCAs) and re/insurers, potentially discouraging the use of reinsurance capacity from third countries.
“Worryingly, the draft Statement is essentially bypassing the Solvency II framework, including the European Commission’s equivalence decisions. Insurance Europe calls for the Statement to clarify its interaction with these equivalence decisions and the EU-US Covered Agreement, and not override them. This includes recognising the distinctions between equivalent and non-equivalent jurisdictions,” the lobby group added.
In its response, Insurance Europe also wanted to reiterate the importance of the competitiveness of the European re/insurance industry.
It also noted that the industry also warns of the risk of reciprocity by other jurisdictions, in case of restricted market access for non-EU reinsurers to the EU, potentially making EU reinsurance less attractive overseas.
The group also called for the Statement and impact assessment to be revised to highlight the importance, and benefits, of cross-border reinsurance – including achievements such as equivalence decisions and the EU-US Covered Agreement.
Finally, Insurance Europe also called for consistency and clarity in EIOPA’s approach to reinsurance.
“ EIOPA itself identified reinsurance as a crucial element to addressing the insurance protection gap, yet the Statement on third country reinsurance conveys a different – and potential conflicting – message on reinsurance,” said the federation.
Adding: “Cross-border reinsurance and access to global capital play a key role in addressing the protection gap, and this needs to be reflected in the Statement.”
