Changes from plenary report to adopted text

Removed‘2a. Member States shall require that insurance and reinsurance undertakings appoint different persons to carry-out the key functions of risk management, actuarial, compliance and internal audit, and that each such function is performed in an independent manner from the other in order to avoid conflict of interests.

RemovedWhen the undertaking has been classified as a low-risk profile undertaking, the persons responsible for the key functions of risk management, actuarial and compliance function may also perform any other key function different from internal audit, any other non-key function or be a member of the administrative, management or supervisory body provided that the following conditions are met:

Removed(a) potential conflicts of interests are properly managed;

Removed(b) the combination of functions or the combination of a function with the condition of membership of the administrative, management or supervisory body does not compromise the person’s ability to carry out her or his responsibilities.’;

Removed(c) paragraph 3 is replaced by the following:

Removed‘3. Insurance and reinsurance undertakings shall have written policies in relation to at least risk management, internal control, internal audit, remuneration and, where relevant, outsourcing. They shall ensure that those policies are implemented.

RemovedThose written policies shall be reviewed at least annually. They shall be subject to prior approval by the administrative, management or supervisory body and be adapted in view of any significant change in the system or area concerned. Low-risk profile undertakings may perform a less frequent review, at least every five years, unless the supervisory authority concludes, based on the specific circumstances of that undertaking, that a more frequent review is needed.’;

Removed(22) Article 42 is amended as follows:

Removed(a) paragraph 3 is replaced by the following:

Removed‘3. Insurance and reinsurance undertakings shall notify their supervisory authority if any of the persons referred to in paragraphs 1 and 2 no longer fulfil the requirements referred to in paragraph 1 or have been replaced for that reason.’;

Removed(b) the following paragraph 4 is added:

Removed‘4. Where a person who effectively runs the undertaking or has other key functions does not fulfil the requirements set out in paragraph 1, the supervisory authorities shall have the power to require the insurance and reinsurance undertaking to remove such person from that position.’;

Removed(23) Article 44 is amended as follows:

Removed(a) paragraph 2 is amended as follows:

Removed(i) point (e) is replaced by the following:

Removed‘(e) operational risk management, including cyber security as defined in Article 2, point (1), of Regulation (EU) 2019/881 of the European Parliament and of the Council*;

Removed__________________________

Removed* Regulation (EU) 2019/881 of the European Parliament and of the Council of 17 April 2019 on ENISA (the European Union Agency for Cybersecurity) and on information and communications technology cybersecurity certification and repealing Regulation (EU) No 526/2013 (Cybersecurity Act) (OJ L 151, 7.6.2019, p. 15).’;

Removed(i a) the following point (g) is added:

Removed‘(g) environmental, social and governance risks relating to the investment portfolio and the management thereof. ’

Removed(ii) the following subparagraphs are added:

Removed‘Where insurance or reinsurance undertakings apply the volatility adjustment referred to in Article 77d, their liquidity plans shall take into account the use of the volatility adjustment and assess whether liquidity constraints may arise which are not consistent with the use of the volatility adjustment.

RemovedSupervisory authorities shall ensure that undertakings, as part of their risk management, have strategies, policies, processes and systems for the identification, measurement, management and monitoring of environmental, social and governance risks over an appropriate set of time horizons.’;

Removed(b) paragraph 2a is amended as follows:

Removed(i) the first subparagraph is amended as follows:

Removed– in point (b), point (i) is replaced by the following:

Removed‘(i) the sensitivity of their technical provisions and eligible own funds to the assumptions underlying the calculation of the matching adjustment, including the calculation of the fundamental spread referred to in Article 77c(1), point (b);’;

Removed– in point (b), point (iii) is deleted;

Removed– point (c) is replaced by the following:

Removed‘(c) where the volatility adjustment referred to in Article 77d is applied, the sensitivity of their technical provisions and eligible own funds to changes in the economic conditions that would affect the risk corrected spread referred to in Article 77d(3).’;

Removed(ii) the third subparagraph is replaced by the following:

Removed‘Where the volatility adjustment referred to in Article 77d is applied, the written policy on risk management referred to in Article 41(3) shall take account of the volatility adjustment.’;

Removed(c) the following paragraphs are inserted:

Removed‘2b. Member States shall ensure that insurance and reinsurance undertakings develop specific plans, quantifiable targets, and processes to monitor and address the risks arising in the short, medium, and long-term ESG factors, including those arising from the transition and the process of adjustment to the applicable regulatory objectives towards a sustainable economy in relation to environmental, social, and governance factors, in particular with the objective to achieve climate neutrality by 2050 as set out in Regulation (EU) 2021/1119 (European Climate Law).

RemovedThe targets and measures to address the ESG risks included in the plans referred to in the first subparagraph shall consider the latest reports and measures prescribed by the European Scientific Advisory Board on Climate Change, in particular in relation to the achievement of the climate targets of the Union. Where the undertaking discloses information on ESG matters in accordance with Directive 2013/34/EU the plans referred to in the first subparagraph shall be consistent with the plans referred to in Article 19a or Article 29a of that Directive. In particular, the plans referred to in the first subparagraph shall include actions with regards to the business model and strategy of the undertaking that are consistent across both plans.’;

Removed2c. By way of derogation, paragraph 2b shall not apply to low-risk profile undertakings.’;

Removed(24) Article 45 is amended as follows:

Removed(a) in paragraph 1, second subparagraph, the following points (d), (e) and (f) are added:

Removed‘(d) consideration and analysis of the macroeconomic situation, and possible macroeconomic and financial markets’ developments, and, upon a reasoned request of the supervisory authority, macroprudential concerns, that may affect the specific risk profile, the approved risk tolerance limits, the business strategy, the underwriting activities or the investment decisions, and the overall solvency needs referred to in point (a) of the undertaking;

Removed(e) consideration and analysis of the activities of the undertaking that may affect the macroeconomic and financial markets’ developments, and have the potential to turn into sources of systemic risk;

Removed(f) the overall capacity of the undertaking to settle its financial obligations towards policyholders and other counterparties when those obligations fall due, even under stressed conditions.’;

Removed(b) the following paragraphs 1a and 1b are inserted:

Removed‘1a. For the purpose of paragraph 1, points (d) and (e), macroeconomic and financial markets’ developments shall include, at least, changes in the following:

Removed(a) the level of interest rates and spreads;

Removed(b) the level of financial market indices;

Removed(c) inflation;

Removed(d) interconnectedness with other financial market participants;

Removed(e) climate change, pandemics, other mass-scale events and other catastrophes, which may affect insurance and reinsurance undertakings.

RemovedFor the purpose of the paragraph 1, point (d), macroprudential concerns shall include, at least, plausible unfavourable future scenarios and risks related to the credit cycle and economic downturn, herding behaviour in investments or excessive exposure concentrations at the sectoral level.

Removed1b. Member States shall ensure that the analysis required under paragraph 1, point (d), is commensurate to the nature of risks as well as the scale and complexity of the activities of undertakings. Member States shall ensure that insurance and reinsurance undertakings that are classified as low-risk profile undertakings, pursuant to Article 29c, and undertakings which have obtained prior supervisory approval, pursuant to Article 29d, are not obliged to conduct the analysis referred to in paragraph 1, point (e).’;

Removed(c) the following paragraph 2b is inserted:

Removed‘2b. Where the insurance or reinsurance undertaking applies the volatility adjustment referred to in Article 77d, the assessment referred to in paragraph 1 of this Article shall, in addition, include the significance with which the risk profile of the undertaking concerned deviates from the assumptions underlying the volatility adjustment.’;

Removed(d) paragraph 5 is replaced by the following:

Removed‘5. Insurance and reinsurance undertakings shall perform the assessment referred to in paragraph 1 annually, and without any delay following any significant change in their risk profile.

RemovedBy way of derogation from the first subparagraph of this paragraph, insurance undertakings may perform the assessment referred to in paragraph 1 at least every two years and without any delay following any significant change in their risk profile, unless the supervisory authority concludes based on the specific circumstances of the undertaking that a more frequent assessment is needed, where either of the following conditions is met:

Removed(a) the insurance undertaking is classified as low risk profile undertaking;

Removed(b) the insurance undertaking is an insurance captive undertaking or a reinsurance captive undertaking that complies with all of the following criteria:

Removed(i) all insured persons and beneficiaries are legal entities of the group of which the captive insurance undertaking or captive reinsurance undertaking is part or natural persons eligible to be covered under that group’s insurance policies and the business covering natural persons eligible to be covered under the group insurance policies remains below 5% of technical provisions;

Removed(ii) the insurance obligations and the insurance contracts underlying the reinsurance obligations of the captive insurance undertaking or captive reinsurance undertaking do not consist of any compulsory third-party liability insurance.

RemovedThe exemption from the annual assessment shall not prevent the undertaking from identifying, measuring, monitoring, managing and reporting risks on a continuous basis.’;