Insurers

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EIOPA statement on actions to mitigate the impact of Coronavirus/COVID-19 on the EU insurance sector

The European Insurance and Occupational Pensions Authority (EIOPA), in close communication and cooperation with the other European Supervisory Authorities and the European Systemic Risk Board, has been monitoring the Coronavirus/COVID-19 situation very closely as the outbreak continues to cause disruption to households and businesses.

It is increasingly clear that the outbreak is having significant consequences for the global economy, including financial services.

Insurers are likely to face progressively difficult conditions in the immediate future, both in terms of navigating challenging market conditions and in maintaining operations, while taking steps to protect employees and customers.

Business continuity

1. It is particularly important that insurers are able to maintain the services to their clients. In this sense, insurance companies should be ready to implement the necessary measures to ensure business continuity.
2. In order to offer operational relief in reaction to coronavirus, national competent authorities (NCAs) should be flexible regarding the timing of supervisory reporting and public disclosure regarding end 2019. EIOPA will coordinate the specifics of the approach.
3. Furthermore, in the short term, EIOPA will limit its requests of information and the consultations to the industry to essential elements needed to assess and monitor the impact of the current situation in the market.
4. EIOPA is extending the deadline of the Holistic Impact Assessment for the 2020 Solvency II Review by two months, to 1 June 2020. In the coming days, EIOPA will communicate details on postponing additional reporting and information requirements.

Solvency and capital position

5. Under Solvency II, EU insurance companies are required to hold sufficient eligible own funds on an on-going basis to cover their Solvency Capital Requirement. The risk-based Solvency Capital Requirement enables insurance undertakings to absorb significant losses and give confidence to policyholders and beneficiaries that payments will be made as they fall due.
6. Furthermore, the Solvency II framework includes a ladder of supervisory intervention between the Solvency Capital Requirement and the Minimum Capital Requirement, which is the minimum level of security below which a company’s financial resources should not fall. This allows for flexibility in cases of extreme situations, including measures to extend the recovery period of affected insurers, for example, as foreseen by Article 138 of the Solvency II Directive.
7. Moreover, recent stress tests have shown that the sector is well capitalised and able to withhold severe but plausible shocks to the system.
8. The Solvency II framework also includes a number of tools that can be used to mitigate risks and impacts to the sector. EIOPA and the NCAs stand ready to implement these tools, if and when necessary, in a coordinated manner, to ensure that policyholders remain protected and financial stability is safeguarded.
9. Nevertheless, insurance companies should take measures to preserve their capital position in balance with the protection of the insured, following prudent dividend and other distribution policies, including variable remuneration.
10. Notwithstanding existing tools and powers, and together with national authorities and the other ESAs and the ESRB, EIOPA will continue to monitor the situation and will take or propose to EU institutions any measure necessary in order to mitigate the impact of market volatility to the stability of the insurance sector in Europe and safeguard the protection of policyholders.

EIOPA issues Recommendations on supervisory flexibility regarding deadlines of supervisory reporting and public disclosure by insurers

Today, the European Insurance and Occupational Pensions Authority (EIOPA) has issued Recommendations addressed to national competent authorities on supervisory flexibility regarding the deadline of supervisory reporting and public disclosure in light of the Coronavirus/COVID-19 pandemic.

EIOPA has issued these Recommendations so that undertakings can concentrate their efforts on monitoring and assessing the impact of the Coronavirus/COVID-19 situation as well as ensuring business continuity during these difficult times.

The Recommendations aim to offer operational relief in allowing for delays in reporting and public disclosure in the following cases:

• Annual reporting referring to year-end occurring on 31 December 2019
• Quarterly reporting referring to Q1-2020
• Solvency and Financial Condition Report referring to year-end occurring on 31 December 2019
• The Recommendations also identify the current situation as a major development and therefore highlight the need for insurers to publish appropriate information on the effect of the Coronavirus/COVID-19 in the published information.

The Recommendations are issued in accordance with Article 16 of Regulation (EU) No 1094/2010  (EIOPA Regulation) and are based on Directive 2009/138/EC  (Solvency II Directive) and EIOPA’s guidelines and other relevant EIOPA instruments.

EIOPA statement on dividends distribution and variable remuneration policies in the context of COVID-19

EIOPA considers that it is essential to ensure the access to and continuity of insurance services, safeguarding the ability of the insurance sector to continue to perform its role as risk transfer mechanism from citizens and businesses and its capacity to mobilize savings and invest them in the real economy. This objective requires that (re)insurers take all necessary steps to continue to ensure a robust level of own funds to be able to protect policyholders and absorb potential losses.

As mentioned in EIOPA’s statement of 17 March, in the context of the current crisis all (re)insurers should take measures to preserve their capital position in balance with the protection of the insured, following prudent dividend and other distribution policies, including variable remuneration.

In exercising this prudence, (re)insurers should ensure that their assessment of the overall solvency needs is forward-looking, taking due account of the current level of uncertainty on the depth, magnitude and duration of the impacts of COVID-19 in financial markets and on the economy and the repercussions of that uncertainty in their solvency and financial position.

Against this background of uncertainty, EIOPA urges that at the current juncture (re)insurers temporarily suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders. This suspension should be
reviewed as the financial and economic impact of the COVID-19 starts to become clearer. 

Taking into account the need to preserve an efficient and prudent allocation of capital within insurance groups and the proper functioning of the Single Market, EIOPA urges that this prudent approach is applied by all (re)insurance groups at
the consolidated level and also regarding significant intra-group dividend distributions or similar transactions, whenever these may materially influence the solvency or liquidity position of the group or of one of the undertakings involved. The materiality of this impact should be monitored jointly by the group and solo supervisors.

This prudent approach should also be applicable to the variable remuneration policies. It is expected that (re)insurers review their current remuneration policies, practices and rewards and ensure that they reflect prudent capital planning and are consistent with, and reflective of, the current economic situation. In such context, the variable part of  remuneration policies should be set at a conservative level and should be considered for postponement. (Re)insurers that consider themselves legally required to pay-out dividends or large amounts of variable remuneration should explain the underlying reasons to their National Competent Authority.

EIOPA: update on other measures impacted by COVID-19 pandemic

1. The outbreak of COVID-19 has significantly impacted the activities of EIOPA, NCAs and financial institutions, ranging from the need to assess implications to the market and propose immediate regulatory measures relevant for the current situation, to the deployment of business continuity plans.
2. As announced, from 16 March 2020 EIOPA is continuing its operations with all EIOPA staff teleworking. NCAs are subject to similar challenges.
3. It is particularly important that insurers are able to maintain the services to their clients. In this sense, insurance companies should be ready to implement the necessary measures to ensure business continuity and it is important that EIOPA and NCAs offer operational relief to insurers when possible.
4. In this regard, in its Statement published on 17 March, EIOPA announced it would limit its requests of information and the consultations to the industry to essential elements needed to assess and monitor the impact of the current situation in the market.
5. To ensure that priorities are consistent with the current situation, EIOPA is reprioritising and alleviating the burden by extending the deadlines or delaying projects where input from NCAs and/or industry is foreseen
6. As the capacity of financial institutions to respond to EIOPA consultation papers or calls for evidence is supposed to be affected by the current situation, it is proposed that the consultation period is extended in relation to currently open consultations to the market. Details of the new consultation period end dates can be found in the points below:

• Review of technical implementation means for the package on Solvency II Supervisory Reporting and Public Disclosure, comments deadline is extended by six weeks from 20 April to 1 June 2020;
• Consultation on PEPP ITSs, comments deadline is extended by four weeks from 20 May to 17 June 2020;
• Consultation on Discussion Paper on IBOR transitions, comments deadline is extended by nine weeks from 30 April to 30 June 2020;
• Market and Credit Risk Comparative Study, information request deadline is extended by 5 weeks from 31 May to 3 July.

7. Discussion Note on value-chain/Insurtech, publication for comments delayed to a date to be determined.
8. Second discussion paper on methodological principles of insurance stress testing, publication for public comments delayed to a date to be determined.
9. The list of data requests is presented below:

• it was planned in any event not to carry out this year the LTG review information request to undertakings. The information request to NCAs will be postponed from Q2 probably to Q3.
• Climate risk sensitivity analysis 2020, data request to complete data available for top-down element and qualitative survey to groups reporting for FS purposes as agreed in the roadmap for the 2020 exercise on climate-related transition risks will be cancelled. The report will be performed with the available information.
• Data collection for the work on the impact of ultra low yields on insurers to complement SII data planned for Q1/Q2 will be launched later also to incorporate COVID-19 reflections if necessary.

EIOPA urges insurers and intermediaries to continue to take actions to mitigate the impact of Coronavirus/COVID-19 on consumers

The European Insurance and Occupational Pensions Authority (EIOPA) has issued today a statement to insurers and intermediaries, urging them to take steps to mitigate the impact of Coronavirus/COVID-19 on consumers.

While the unprecedented disruption caused by the outbreak has focused insurers’ attention on ensuring business continuity, it is important that consumers continue to be treated fairly. Consumers still rely on insurance during this difficult time and it is essential that insurers continue to provide access to and continuity of service.

EIOPA welcomes initiatives already taken by insurers and intermediaries in recognition of the particular circumstances that consumers find themselves and which may prevent consumers from fulfilling contractual obligations.

Nevertheless, unfair treatment of consumers as a result of disruption to the market is a risk to the entire sector.

With this statement, EIOPA specifically asks insurers and intermediaries to consider a number of different actions, taking into account developments relating to the Coronavirus/COVID-19 outbreak. These include:

• Providing clear and timely information to consumers;
• Keeping consumers informed about contingency measures that have been put in place;
• Continuing to apply product oversight and governance requirements; and
• Exercising flexibility in the treatment of consumers where reasonable and practical.
• Whilst highlighting the need for flexibility in the interest of consumers and for their continued fair treatment, EIOPA also highlights that imposing retroactive coverage of claims not envisaged within contracts could create material solvency risks and ultimately threaten policyholder protection.

EIOPA and national supervisory authorities (NSAs) are working collectively to ensure financial stability, market integrity and consumer protection during this time of disruption.

This call to action follows the publication of a statement on actions to mitigate the impact of Coronavirus/COVID-19 on the EU insurance sector; and Recommendations on supervisory flexibility regarding deadlines of supervisory reporting and public disclosure by insurers.

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