FERMA has submitted a response to EIOPA’s consultation on new proportionality regime under Solvency II, which calls upon EIOPA and national competent authorities to ensure Solvency II will be applied in a truly proportionate manner.
EIOPA’s consultation comes at an important moment. At the end of 2023, the co-legislators agreed on the revisions to Solvency II, yet the final text has not been published in the Official Journal of the European Union. This means the market is operating on the assumption the changes will bring with them more proportionality but awaits the technical specifications. As ever, the devil is in the details.
Nevertheless, the text that was agreed at a political level contained a political commitment to more proportionality as a principle in Solvency II. This was signaled by the creation of a new category of undertaking, so-called Small and Non-Complex Undertakings (SNCU). Provided undertakings meet a set of criteria, once designated as a SNCU by their national competent authority they would be entitled to make use of more proportionate regulatory requirements, such as reduced reporting requirements and less stringent requirements on key function holders.
The EIOPA consultation was launched in August with the aim of gathering input that would help formulating technical specifications. In this spirt, the consultation asks the public the questions of: 1) does the methodology for classifying insurance undertakings as SNCU need to be fine-tuned? And, 2) how to set conditions for granting proportionality measures to non-SNCUs?
The first part of the consultation directly impacts FERMA’s network. In response to EIOPA, FERMA submitted its view that there does not need to be further fine-tuning or complexity added to the methodology for classifying SNCUs. FERMA’s assessment is that the methodology and criteria in the politically-agreed text (referring to Article 29a) is abundantly clear. By adding more to an already dense text with three subsections – which are tailored to whether the undertaking writes more life business, non-life business or a mixture – would be unnecessary.
In the second part of EIOPA’s consultation, the supervisor sets out conditions to non-SNCUs seeking to make use of some proportionality measures. In general, FERMA sees good sense in the approach but maintains its overall position that any added detail to the text should maintain the sense of proportionality.
FERMA maintains a watchful eye on next steps and will work with its network to ensure Solvency II is more proportional and straightforward, as well as better-serving captives and the enterprises that make use of them.
See more in our EU Policy Note on Solvency II.