Changes from report parliamentary committee draft to plenary report

Added(ii) the undertaking has failed to submit to the supervisory authority either the initial phasing-in plan within the required period as set out in of Article 308e, second paragraph, or the required annual report as set out the third paragraph of that Article.’;

Removed"Stressed conditions" is a very vague concept.

Added(b) in paragraph 2, the third subparagraph is replaced by the following:

RemovedDirective 2009/138/EC

Added‘In the circumstances set out in paragraph 1, points (d) and (e), the capital add-on shall be proportionate to the material risks arising from the deviation and respectively the non-compliance referred to in those points.’;

RemovedArticle 1 – paragraph 1 – point 54, Article 144a – paragraph 2: 2. For the purpose of paragraph 1, Member States shall ensure that insurance and reinsurance undertakings draw up and keep up to date a liquidity risk management plan projecting the incoming and outgoing cash flows in relation to their assets and liabilities.

Added(20a) in Article 40, the following paragraphs are added:

RemovedDirective 2009/138/EC

Added“The members of the administrative, management and supervisory bodies of the insurance or reinsurance undertaking shall at all times be of good repute and possess collectively sufficient knowledge, skills and experience to perform their duties.

RemovedArticle 1 – paragraph 1 – point 54, Article 144a – paragraph 3: 3. Member States shall ensure that insurance and reinsurance undertakings submit to the supervisory authorities the liquidity risk management plan as part of the information referred to in Article 45.

AddedMembers of the administrative, management and supervisory bodies shall not have been convicted for offences relating to money laundering or terrorist financing or other offences that would question their good repute.”;

RemovedThis would be a better fit for the forward-looking own risk and solvency assessment (ORSA).

Added(21) Article 41 is amended as follows:

RemovedDirective 2009/138/EC

Added(-a) in paragraph 1, the first subparagraph is replaced by the following:

RemovedArticle 1 – paragraph 1 – point 54, Article 144a – paragraph 4: 4. Member States shall ensure that insurance undertakings that are classified as low-risk profile undertakings pursuant to Article 29c and insurance or reinsurance undertakings which have obtained prior approval from the supervisory authority pursuant to Article 29d are not obliged to draw up a liquidity risk management plan as referred to in paragraph 2 of this Article.

Added‘Member States shall require all insurance and reinsurance undertakings to have in place an effective system of governance which provides for sound and prudent management of the business. For environmental, social and governance risks, undertakings shall explicitly take into account the short-term, medium-term and long-term horizon when assessing the possible materialisation of those risks.’;

RemovedDirective 2009/138/EC

Added(a) in paragraph 1, the third subparagraph is replaced by the following:

RemovedArticle 1 – paragraph 1 – point 54, Article 144a – paragraph 5: 5. Member States shall ensure that, where insurance and reinsurance undertakings apply the matching adjustment referred to in Article 77b or the volatility adjustment referred to in Article 77d, they may combine the liquidity risk management plan referred to in paragraph 2 of this Article with the plan required in accordance with Article 44(2), third subparagraph.

Added‘The system of governance shall be subject to regular internal review. Such internal review shall include an assessment on the adequacy of the composition, effectiveness and internal governance of the administrative, management or supervisory body taking into account the nature, scale and complexity of the risks inherent in the undertaking’s business.’;

RemovedEditorial correction: reference is incorrect.

AddedInsurance and reinsurance undertakings shall set individual quantitative objectives in view of improving gender-balanced representation of both sexes within their governance structures.’;

RemovedDirective 2009/138/EC

Added(b) the following paragraph 2a is inserted:

RemovedArticle 1 – paragraph 1 – point 54, Article 144a – paragraph 6: deleted / (deleted) / (deleted)

Added‘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.

RemovedThis seems unnecessary and is likely to result in additional red tape.

AddedWhen 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:

RemovedDirective 2009/138/EC

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

RemovedArticle 1 – paragraph 1 – point 54, Article 144b – paragraph 2 – subparagraph 2: The measures taken by supervisory authorities on the basis of this paragraph shall be reviewed at least every six months by the supervisory authority and be removed when the undertaking has taken effective remedies.

Added(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.’;

RemovedGiven the severity of the measures, a more frequent review is justified.

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

RemovedDirective 2009/138/EC

Added‘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.

RemovedArticle 1 – paragraph 1 – point 54, Article 144b – paragraph 3 – subparagraph 1: Member States shall ensure that, in relation to undertakings facing extreme liquidity risks that may cause a severe and imminent threat to the protection of policyholders or to the stability of the financial system, supervisory authorities have the power to temporarily: / (a) restrict or suspend dividend distributions to shareholders and other subordinated creditors; / (b) restrict or suspend other payments to shareholders and other subordinated creditors; / (c) restrict or suspend share buy-backs and repayment or redemption of own fund items; / (d) restrict or suspend bonuses or other variable remuneration; / (e) suspend redemption rights of life insurance policy holders.

AddedThose 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.’;

RemovedDirective 2009/138/EC

Added(22) Article 42 is amended as follows:

RemovedArticle 1 – paragraph 1 – point 54, Article 144b – paragraph 3 – subparagraph 2: Such a power shall only be exercised in exceptional circumstances, as a last resort measure and where this is in the collective interest of policyholders. Before exercising such a power, the supervisory authority shall take into account potential unintended effects on financial markets and on the rights of policyholders, including in a cross-border context. Supervisory authorities shall duly justify the application of those powers in writing.

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

RemovedDirective 2009/138/EC

Added‘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.’;

RemovedArticle 1 – paragraph 1 – point 54, Article 144b – paragraph 3 – subparagraph 3: The application of the measure referred to in the first subparagraph may last three months. Member States shall ensure that the measure can be renewed if the underlying reasons that justify it are still present and it is no longer applied when those reasons are no longer present.

Added(b) the following paragraph 4 is added:

RemovedDirective 2009/138/EC

Added‘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.’;

RemovedArticle 1 – paragraph 1 – point 54, Article 144b – paragraph 3 – subparagraph 4: Member States shall ensure that redemption rights of life insurance policy holders may only be suspended if the powers referred to in points (a) to (d) of the first subparagraph have been fully exhausted. Insurance and reinsurance undertakings concerned shall not make distributions to shareholders and other subordinated creditors, and shall not pay bonuses or other variable remuneration where such payment is fully under the discretion of the undertaking until the suspension of redemption rights is lifted by the supervisory authorities.

Added(23) Article 44 is amended as follows:

RemovedDirective 2009/138/EC

Added(a) paragraph 2 is amended as follows:

RemovedArticle 1 – paragraph 1 – point 54, Article 144b – paragraph 3 – subparagraph 5: deleted

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

RemovedDirective 2009/138/EC

Added‘(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*;

RemovedArticle 1 – paragraph 1 – point 54, Article 144b – paragraph 3 – subparagraph 6: deleted

Added__________________________

RemovedDirective 2009/138/EC