Insurance & Asset Management Update – December
  • Wednesday, 16 December 2020

Insurance & Asset Management Update – December

Insurance

EIOPA’s opinion on the Solvency II 2020 review

The European and Occupational Pensions Authority (EIOPA) issued its opinion regarding the Solvency II Directive. It states the Solvency II framework is working well: “A risk-based approach to assess and mitigate risks is applied, the insurance industry has better aligned capital to the risks it runs, governance models and their risk management capacity have been significantly strengthened, and insurers throughout Europe use harmonized templates for supervisory reporting, instead of a patchwork of national templates)”. EIOPA identifies three main themes for improvement:

  • Balanced updating of the regulatory framework with a phased introduction of key components depending on the impact of the prevailing economic situation on insurers.
  • Recognition of economic situation (low interest rates) by creating proper provisions for, market rate movements.
  • Regulatory toolbox completion with recovery and resolution measures, insurance guarantee schemes and macro prudential tools.

According to EIOPA, Solvency II needs to better reflect that insurers having long-term and illiquid liabilities can hold long-maturing assets.

EIOPA launches discussion paper on a methodology for integrating climate change in Solvency II

As a follow up of last year’s opinion on sustainability within Solvency II, EIOPA is asking for considerations how to account for climate change and natural catastrophes in the framework. The risk due to climate change and frequency from natural hazards is expected to increase. The discussion paper is part of EIOPA’s broader sustainability agenda which is also fueled by the European Commission’s ‘Green Deal’. Stakeholders are invited to provide their comments by 26 February 2021.

Please contact Lennard Beijering or Nicolas Ziob for more information regarding the Solvency II review and climate change risk.

Asset Management

New IFR/IFD requires banking licence for particular investment firms

In June 2021, the new Investment Firm Directive (IFD) and Investment Firm Regulation (IFR), issued by the European Union in December 2019, will enter into force, requiring particular investment firms to request a banking license, as stated by the Dutch Central Bank (DNB). This requirement is applicable to investment firms either:

  • dealing on own account or
  • underwriting financial instruments and/or placing of financial instruments on a firm commitment basis

Preparing for a smooth transition, the European Banking Authority (EBA) already published draft Regulatory Technical Standards (RTS) on the prudential treatment of investment firms. These standards aim to define the main aspects regarding the methodologies to be applied in the calculation of regulatory capital requirements for the investment firms affected by the new regulations.

Please contact Mark van Maaren or Bas van Oers for more information on regulatory changes for investment firms and the calculation of capital requirements.

IBOR Reform

AFM and DNB publish questionnaire results about transition to alternative rate benchmarks

The Dutch Authority for the Financial Markets (AFM) and the Dutch Central Bank (DNB) encourage market participants to make progress in the adjustment of financial contracts to reference alternative benchmarks. Most of the Euro contracts already referenced alternative rate benchmarks in 2020. Parties which have issued contracts referencing EURIBOR must define a fallback benchmark in the case that EURIBOR should cease to exist past 31 December 2021. Furthermore, contracts in other currencies still predominantly refer to IBOR benchmarks and need to be amended timely. In total, 84 financial institutions responded to the questionnaire.

Please contact Niels Felix or Lennard Beijering for more information regarding the IBOR reform or fallback benchmarks.