25 July 2017

Insurance Europe: Feedback provided on EC proposal for changes to EMIR

Insurance Europe welcomes the recent EC proposal amending EMIR and in particular the following changes: 

• Removing the requirement for dual-side reporting of exchange-traded derivatives. Insurance Europe supports the EC proposal for CCPs to be solely responsible for reporting the details of such transactions (new paragraph 1a in Article 9). 
• Clarifying that the obligation to centrally clear may be temporarily suspended by ESMA, thus ensuring that insurers are not exposed to liability in cases of CCP failure or exit from providing clearing services for particular contract types (new Article 6b). 
• Attempting to address the access issues which small- and medium-size insurers face when trying to secure arrangements with clearing members for the provision of central clearing services (new paragraph 3a in Article 4 (3)).

However, Insurance Europe believes that several concerns raised by the insurance industry in the past with respect to EMIR are still outstanding and should be addressed as part of this review. These include:

• In the area of intragroup transactions, the burdensome procedures around exempting OTC intragroup transactions from collateralisation requirements should be simplified. 
• In the area of reporting, single-side reporting should be introduced for all centrally cleared transactions, and not only for exchange-traded derivatives, as currently proposed.

In addition, the industry remains concerned by the practical application of EMIR, which requires insurers to post cash when centrally clearing. As highlighted in the past, the industry has significant concerns over the potentially high need for cash to cover variation/initial margin needs.

While EMIR recognises the cash challenge faced by pension scheme arrangement (PSA), it fails to recognise that the same challenge applies to all insurers with long-term business. Insurance Europe welcomes the EC’s decision to delay variation margin posting obligations on PSAs.

Furthermore, it welcomes the proposed mandate for the European Supervisory Authorities (ESAs) and the ESRB to investigate and assess whether further measures are necessary to facilitate clearing solutions for PSAs. Insurance Europe looks forward to contributing to this work, and believes that any investigations should also cover the concerns of the insurance industry and any solutions found should also be considered for the insurance industry.

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