Changes from report parliamentary committee draft to plenary report

RemovedRecital 83: (83) The United Kingdom became a third country on 1 February 2020 and Union law ceased to apply to and in the United Kingdom on 31 December 2020. Given that Directive 2009/138/EC has several provisions that address the specifics of particular Member States, where such provisions specifically concern the United Kingdom, they have become obsolete and should therefore be deleted. The calibrations used for the delegated acts and implementing acts adopted by the Commission are often based on data that is heavily influenced by the inclusion of data from the United Kingdom market. Therefore, all calibrations that are input for the calculations of the Solvency Capital Requirement and the Minimum Capital Requirement should be reviewed to determine whether they are dependent on UK data and, where applicable, UK data should be eliminated from the relevant data sets.

Added(5b) The further integration of the single market for insurance is a key objective of this amending Directive. The integration of the EU single market for insurance increases competition and the availability of insurance products across Member States to the benefit of businesses and consumers. Insurance failures in the single market for insurance since the application of Solvency II emphasise the need for more consistency and convergence of supervision across the Union. The supervision of insurance and reinsurance undertakings operating under the freedom to provide services and the freedom of establishment should be further improved without undermining the objective of further integrating the single market for insurance to ensure consistent consumer protection and safeguarding fair competition across the single market.

RemovedDirective 2009/138/EC

Added(6) Directive 2009/138/EC excludes certain undertakings from its scope, due to their size. Following the first years of application of Directive 2009/138/EC and with a view to ensuring that it does not unduly apply to undertakings of reduced size, it is appropriate to review those exclusions by increasing those thresholds, so that more small insurance undertakings that fulfil certain conditions are not subject to that Directive. However, undertakings benefitting from such increased thresholds should have the option to keep or seek authorisation under Directive 2009/138/EC in order to benefit from the single license provided therein.

RemovedArticle 1 – paragraph 1 – point 2 – introductory part, Article 4 – paragraph 1: (2) in Article 4(1), points (a), (b) and (c) are replaced by the following:

Added(7) Directive 2009/138/EC does not apply to an assistance activity where the conditions of Article 6(1) of that Directive are fulfilled. The first condition states that the assistance is to be related to accidents or breakdowns involving a road vehicle which occurs in the territory of the Member State of the undertaking providing cover. That provision could mean a requirement of authorisation as insurer for providers of assistance of road vehicles in the event of an accident or breakdown that occurs just across the border and may unduly disrupt assistance. For this reason, it is appropriate to review that condition. Therefore, the condition under Article 6(1), point (a), of Directive 2009/138/EC should be also extended to accidents or breakdowns, involving the road vehicle covered by that undertaking, that occur occasionally in a neighbouring country.

RemovedDirective 2009/138/EC

Added(8) Insurance and reinsurance undertakings can submit an application for authorisation in any Member State. Information on previous applications and the outcomes of the assessment of such applications could provide essential information for the assessment of their application. Therefore, the supervisory authority should be informed by the applicant insurance or reinsurance undertaking about previous rejections or withdrawals of authorisation in another Member State.

RemovedArticle 1 – paragraph 1 – point 2, Article 4 – paragraph 1 – point a: (a) the undertaking’s annual gross written premium does not exceed EUR 25 000 000;

Added(9) Prior to the granting of authorisation, the supervisory authority of the home Member State should consult the supervisory authorities of any Member States concerned. In view of increased cross-border insurance activities, it is necessary to enhance the convergent application of Union law in cases of cross-border insurance activity and the exchange of information between the supervisory authorities, in particular before authorisations are granted. Therefore, where several supervisory authorities need to be consulted, any supervisory authority concerned should be allowed to request a joint assessment of an application for authorisation from the supervisory authority of the Member State where the authorisation process is ongoing.

RemovedDirective 2009/138/EC

Added(10) Directive 2009/138/EC should be applied in accordance with the proportionality principle. To facilitate the proportionate application of the Directive to undertakings presenting a lower risk profile than the average undertaking, and to ensure that they are not subject to disproportionately burdensome requirements, it is necessary to provide risk-based criteria that allow for their identification.

RemovedArticle 1 – paragraph 1 – point 2, Article 4 – paragraph 1 – point b: (b) the total of the undertaking’s technical provisions, gross of the amounts recoverable from reinsurance contracts and special purpose vehicles, as referred in Article 76, does not exceed EUR 65 000 000;;

Added(11) Undertakings complying with the risk-based criteria should be able to be classified as low-risk profile undertakings pursuant to a simple notification process. Where, within one month after such notification, the supervisory authority does not oppose the classification for duly justified reasons linked to the assessment of the relevant criteria, that undertaking should be deemed as low-risk profile undertaking. Once classified as a low-risk profile undertaking, in principle, it should automatically benefit from identified proportionality measures on reporting, governance, revision of written policies, own-risk solvency assessment and disclosure requirements.

RemovedDirective 2009/138/EC

Added(12) It is appropriate that proportionality measures are available also to undertakings that are not classified as low-risk profile undertakings, but for which some of the requirements of Directive 2009/138/EC are too costly and complex, in view of the risks involved in the business carried out by such undertakings. Those undertakings should be permitted to use proportionality measures based on a case-by-case analysis and following prior approval by their supervisory authorities.

RemovedArticle 1 – paragraph 1 – point 2, Article 4 – paragraph 1 – point c: (c) where the undertaking belongs to a group, the total of the technical provisions of the group defined as gross of the amounts recoverable from reinsurance contracts and special purpose vehicles does not exceed EUR 65 000 000;

Added(13) A proper implementation of the proportionality principle is crucial to avoiding excessive burden on insurance and reinsurance undertakings. Supervisory authorities need to be regularly informed of the use of proportionality measures. For this reason, insurance and reinsurance undertakings should annually report to their supervisory authorities information on the proportionality measures they use.

RemovedDirective 2009/138/EC

Added(14) Captive insurance undertakings and captive reinsurance undertakings which only cover risks associated with the industrial or commercial group to which they belong, present a particular and generally lower risk profile that should be taken into account when defining some requirements, in particular on own-risk and solvency assessment, disclosures and the related empowerments for the Commission to further specify the rules on such empowerments. Therefore, captive insurance undertakings and captive reinsurance undertakings should▌ benefit from the proportionality measures by being automatically classified as low-risk profile undertakings.

RemovedArticle 1 – paragraph 1 – point 5 – point b, Article 13 – paragraph 1 – point 10a: (10a) ‘low-risk profile undertaking’ means an insurance undertaking that meets the conditions set out in Article 29a and has been classified as such in accordance with Article 29b as well as a captive insurance undertaking and a captive reinsurance undertaking;

Added(15) It is important that insurance and reinsurance undertakings maintain a healthy financial position. For that purpose, Directive 2009/138/EC provides for financial supervision with respect to an undertaking’s state of solvency, the establishment of technical provisions, its assets and its eligible own funds. However, the system of governance of an undertaking is also an important factor in ensuring that the undertaking maintains its financial health. To that end, supervisory authorities should be required to carry out regular reviews and evaluations of the system of governance as part of their financial supervision of insurance and reinsurance undertakings.

RemovedCaptive insurance and reinsurance companies do not pose a risk to financial stability and have a simple business model. Therefore, they should automatically be considered as having a low-risk profile.

Added(16) Cooperation between the supervisory authority of the home Member State that granted authorisation to an insurance or reinsurance undertaking and the supervisory authorities of the Member States where that undertaking pursues activities by establishing branches or by providing services, should be strengthened in order to better prevent potential problems affecting consumer rights and to enhance the protection of policyholders across the Union. This cooperation should increase transparency and the regular exchange of information between concerned supervisory authorities and include more information coming from the supervisory authority of the home Member State, in particular regarding the outcome of the supervisory review process related to the cross-border activity, the financial condition of the undertaking, and market conditions which might impact the provision of services.

RemovedDirective 2009/138/EC

Added(17) Supervisory authorities should be entitled to receive from each supervised insurance and reinsurance undertaking and their groups, at least every three years, a regular narrative report with information on the business and performance, system of governance, risk profile, capital management and other relevant information for solvency purposes. In order to simplify this reporting requirement for insurance and reinsurance groups, it should be possible, subject to certain conditions, to submit the information of the regular supervisory report relating to the group and its subsidiaries in an aggregated way for the whole group.

RemovedArticle 1 – paragraph 1 – point 5 – point b, Article 13 – paragraph 1 – point 10 a a (new): (10aa) ‘significant cross-border activities’ means insurance and reinsurance activities carried out by an insurance or reinsurance undertaking under the right of establishment and those carried out under the freedom to provide services in a given host Member State, which exceed 25 % of the annual gross written premium of the undertaking, measured with reference to the last available financial statement of the undertaking.;

Added(18) It should be ensured that low-risk profile undertakings are prioritised when supervisors grant exemptions and limitations to reporting. For this type of entities, the process of notification that applies for the classification as low-risk profile undertakings should ensure that there is enough certainty as regards the use of exemptions and limitations to reporting.

RemovedIntroduces a coherent horizontal definition of ‘significant cross-border activities’ to replace the definitions used in Article 33a and 159a

Added(19) Reporting and disclosure deadlines should be clearly laid down in Directive 2009/138/EC. However, it should be recognised that exceptional circumstances such as sanitary emergencies, natural catastrophes and other extreme events could make it impossible for insurance and reinsurance undertakings to submit such reports and disclosures, within the established deadlines. To this end, the Commission should be empowered to extend the deadlines under such circumstances after having consulted EIOPA.

RemovedDirective 2009/138/EC

Added(20) Directive 2009/138/EC provides that supervisory authorities are to assess whether any new person appointed to manage an insurance or reinsurance undertaking or to perform a key function are fit and proper. However, those who manage the undertaking or perform a key function should be fit and proper on a continuous basis. Supervisory authorities should therefore have the power to react and, where appropriate, to remove the person concerned from the relevant position, in the case of non-compliance with the fit and proper requirements.

RemovedArticle 1 – paragraph 1 – point 5 – point i, Article 13 – paragraph 1 – point 41: deleted / (deleted)

Added(21) As insurance activities could trigger or amplify risks for financial stability, insurance and reinsurance undertakings should incorporate macroprudential considerations and analysis in their underwriting, investment, and risk management activities. This could include taking into account the potential behaviour of other market participants, macroeconomic risks, such as credit cycle downturns or reduced market liquidity, or excessive concentrations at market level in certain asset types, counterparties or sectors.

RemovedThe change proposed by the Commission to include IORPs in the scope of Solvency II does not seem justified.

Added(22) Insurance and reinsurance undertakings should factor any relevant macroprudential information provided by the supervisory authorities in their own-risk and solvency assessment. The supervisory authorities should analyse the own-risk and solvency assessment supervisory reports of undertakings within their jurisdictions, aggregate them and provide input to undertakings on the elements that should be considered in their future own-risk and solvency assessments, particularly as regards macroprudential risks. Member States should ensure that, where they entrust an authority with a macroprudential mandate, the outcome and the findings of macroprudential assessments by the supervisory authorities are shared with that macroprudential authority.

RemovedDirective 2009/138/EC

Added(23) In line with the Insurance Core Principles adopted by the International Association of Insurance Supervisors, national supervisory authorities should be able to identify, monitor and analyse market and financial developments that may affect insurance and reinsurance undertakings, and insurance and reinsurance markets, and should use that information in the supervision of individual insurance or reinsurance undertakings. Those tasks should, where appropriate, use information from, and insights gained by, other supervisory authorities.

RemovedArticle 1 – paragraph 1 – point 7, Article 23 – paragraph 1 – point f: (f) the Member States in the markets of which the insurance or reinsurance undertaking concerned intends to operate;;

Added(24) Authorities with a macroprudential mandate are in charge of the macroprudential policy for their national insurance and reinsurance market. The macroprudential policy can be pursued by the supervisory authority or by another authority or body entrusted with this purpose.

RemovedEditorial correction.

Added(25) Good coordination between supervisory authorities and the relevant bodies and authorities with a macroprudential mandate is important for identifying, monitoring and analysing possible risks to the stability of the financial system that may affect insurance and reinsurance undertakings, and for taking measures to effectively and appropriately address those risks. Cooperation between authorities should also aim to avoid any form of duplicative or inconsistent actions.

RemovedDirective 2009/138/EC

Added(26) Directive 2009/138/EC requires insurance and reinsurance undertakings to have, as an integrated part of their business strategy, a periodic own-risk and solvency assessment. Some risks, such as climate change risks, are difficult to quantify or they materialise over a period that is longer than the one used for the calibration of the Solvency Capital Requirement. Those risks can be better taken into account in the own-risk and solvency assessment. Where insurance and reinsurance undertakings have material exposure to climate risks, they should be required to carry out, within appropriate intervals and as part of the own-risk and solvency assessment, analyses of the impact of long-term climate change risk scenarios on their business. Such analyses should be proportionate to the nature, scale and complexity of the risks inherent in the business of the undertakings. In particular, while the assessment of the materiality of exposure to climate risks should be required from all insurance and reinsurance undertakings, long-term climate scenario analyses should not be required for low-risk profile undertakings.

RemovedArticle 1 – paragraph 1 – point 12 – point a, Article 29 – paragraph 3: 3. Member States shall ensure that the requirements laid down in this Directive are applied in a manner which is proportionate to the nature, scale and complexity of the risks inherent in the business of an insurance or reinsurance undertaking. Member States shall ensure such application in particular, but not exclusively, with respect to those undertakings classified as low-risk profile undertakings.

Added(27) Directive 2009/138/EC requires the disclosure, at least, annually, of essential information through the solvency and financial condition report. That report has two main types of addressees: policyholders and beneficiaries on the one hand, and analysts and other market participants on the other hand. In order to address the needs and the expectations of those two different groups, the content of the report should be divided into two parts. The first part, addressed mainly to policyholders and beneficiaries, should contain the key information on business, performance, capital management and risk profile. The second part, addressed to analysts and other market participants, should contain detailed information on the system of governance, specific information on technical provisions and other liabilities, the solvency position as well as other data relevant for specialised analysts.

RemovedDirective 2009/138/EC

Added(28) It is possible for insurance and reinsurance undertakings to adjust the relevant risk-free interest rate term structure for the calculation of the best estimate in line with the spread movements of their assets after supervisory approval (‘matching adjustment’) or in line with the average spread movement of assets held by insurance and reinsurance undertakings in a given currency or country (‘volatility adjustment’). The part of the solvency and financial condition report addressed to policyholders should only contain the information that is expected to be relevant to the decision-making of an average policyholder. While insurance and reinsurance undertakings should publicly disclose the impact of not applying the matching adjustment, the volatility adjustment and the transitional measures on risk-free interest rates and on technical provisions on their financial positions, such disclosure should not be assumed to be relevant to the decision-making of an average policyholder. The impact of such measures should therefore be disclosed in the part of the solvency and financial condition report addressed to market participants and not in the part addressed to policyholders.

RemovedArticle 1 – paragraph 1 – point 12 – point b, Article 29 – paragraph 5: 5. The Commission may adopt delegated acts specifying the criteria laid down in Article 29a(1), points (a), (b) and (c).

Added(29) Disclosure requirements should not be excessively burdensome for insurance and reinsurance undertakings. To this end, some simplifications and proportionality measures should be included in Directive 2009/138/EC, in particular when they do not jeopardise the readability of the data provided by insurance and reinsurance undertakings. Furthermore, Directive 2013/34/EU should be amended so that low-risk profile undertakings may limit their sustainability reporting according to the simplified SME sustainability reporting standards laid down in that Directive.

RemovedEditorial correction to insert the correct references. Furthermore, the Commission should be allowed to specify, but not to adapt the criteria laid down in this Directive. Adapting the criteria should remain a prerogative of the legislator.

Added(30) In order to guarantee the highest degree of accuracy of the information disclosed to the public▌ part of the solvency and financial condition report should be subject to audit. Such audit requirement should cover the balance sheet assessed in accordance with the valuation criteria set out in Directive 2009/138/EC.

RemovedDirective 2009/138/EC

Added▌

RemovedArticle 1 – paragraph 1 – point 12 – point b, Article 29 – paragraph 6: deleted

Added(32) It should be acknowledged, that, although beneficial, the auditing requirement would be an additional burden for every undertaking. Therefore, annual reporting and disclosure deadlines for insurance and reinsurance undertakings and for insurance and reinsurance groups should be extended in order to give those undertakings sufficient time to produce audited reports.

RemovedThe criteria to identify low-risk profile undertakings should be defined with sufficient clarity by the legislator in this Directive.

Added(33) It should be ensured that the methods for calculating technical provisions of contracts with options on guarantee are proportionate to the nature, scale and complexity of the risks faced by the insurer. In this regard, some simplifications should be provided.

RemovedDirective 2009/138/EC

Added(33a) In order to preserve the international level playing field, the cost of capital should be decreased compared to the level set at the time of adoption of the Directive 2009/138/EC and its delegated acts, while maintaining a sufficient level of prudence and protection of policyholders. In addition, the calculation of the risk margin should account for the time dependency of risks and reduce the amount of the risk margin in particular for long-term liabilities. This would reduce the sensitivity of the risk margin to interest rate changes and the volatility of the prudential balance sheet. An exponential and time dependent element should be introduced to implement this adjustment.