The European Insurance and Occupational Pensions Authority (EIOPA) published today its annual Report on the use of capital add-ons during 2020. It is important that national competent authorities (NCAs) use capital add-ons when needed, with the aim to ensure a high degree of supervisory convergence in its application. It is also important to maintain a level playing field regarding the setting of capital add-ons.

The analysis included in the report is based on 2020 year-end data collected under Directive 2009/138/EC (Solvency II) as reported by the solo undertakings or insurance groups from the European Economic Area, and complemented by a dedicated survey for NCAs that entailed both qualitative and quantitative questions.

During 2020, two NCAs that set capital add-ons in the previous years no longer set capital add-ons in 2020. This situation led to a number of capital add-ons set at the end of 2020 even lower than in 2019. In 2020 seven NCAs set capital add-ons to nine solo undertakings (six non-life and three life undertakings respectively), while in 2019 nine NCAs had set capital add-ons to ten solo undertakings, including two life, seven non-life undertakings and one composite (excluding the capital add-ons set by the UK in the past). For groups, similarly to 2019, no capital add-ons were set during 2020.

Due to the low number of capital add-ons, the weight of capital add-ons imposed on undertakings using the standard formula remains very low overall in 2020 (i.e. less than 0.1% of the total Solvency Capital Requirement of all undertakings). However, it remains significant when considering the amount at individual level accounting for 25% of the total SCR of the undertakings with capital add-ons. Although there is a wide range in its distribution (from 86% to 1%), in all cases (except for one) the capital add-on increases the SCR by at least 10%.

Following the findings of the survey, in view of a decreasing number of capital add-ons at an already low level, EIOPA will continue to monitor the usage of capital add-ons and pay particular attention on the proposals made by NCAs on how to make a more efficient use of this tool in the future.