25 January 2019

EIOPA calls for improvements to the assessment of the propriety of board members and qualifying shareholders of insurance companies

The EIOPA published the findings of its peer review examining how national competent authorities (NCAs) assess the propriety of administrative, management or supervisory body (AMSB) members and qualifying shareholders.

EIOPA reviewed national regulatory frameworks and supervisory practices followed by NCAs to assess the propriety of AMSB members and qualifying shareholders at solo and group level, both at the moment of authorisation and on an ongoing basis. Furthermore, EIOPA assessed the effectiveness of cross-border cooperation.

A key requirement of Solvency II is for insurers to be owned and run by persons of integrity. The primary responsibility to ensure the fitness and propriety of AMSB members at all times rests with insurers, with NCAs carrying out their assessment following the assessment by insurers. Similarly, any acquisition of or changes to qualifying shareholders are subject to review and approval by NCAs. 

This report presents the overall findings of the peer review, including identified best practices, case studies and recommended actions. The findings are published on a named basis.

In general, NCAs invest considerable resources in the initial assessment of AMSB members and qualifying shareholders. However, these tend to be seen as a one-off task with few NCAs undertaking any ongoing assessments as part of their supervisory activities. Ongoing assessment should involve proactive, risk-based and proportionate engagement resulting from the NCAs' own initiative, as part of its supervisory activities.

Other areas requiring action from NCAs were related to the national legislation or regulatory framework; propriety assessment questionnaires; as well as guidance and supervisory records.

The review was initiated following a number of cross-border cases indicating a lack of harmonisation in relation to the propriety assessment across the European Economic Area, leading to potentially divergent outcomes in different countries in relation to the same person.

The review found that complex cross-border cases of propriety assessment can take a long time, hampered by cumbersome information sharing processes. In relation to the definition of propriety of ASMB members, a significant variation with respect to whether and when to consider ongoing prosecution and pending investigations for criminal and administrative offences became apparent. As a result of this peer review, EIOPA will seek to strengthen and support processes of cross-border assessments.

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