Reinsurance is an important tool for capital and risk management used also for risks diversification, access to additional underwriting capacity for portfolio expansion, addressing protection gaps and increasing financial stability. It plays a crucial role in the insurance industry's ability to operate and provide coverage to individuals and businesses. As such, cross-border reinsurance could offer numerous advantages to insurance undertakings.

However, it is important to assess the actual risk mitigation taking place. With this in mind, the objective of this supervisory statement is to highlight the risks stemming from the use of reinsurance provided by reinsurers operating under regulatory regimes not recognized as equivalent to Solvency II. Some parts of the statement, where relevant and explicitly stated, apply also to reinsurance arrangements with reinsurers from equivalent third countries.