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Supervisory convergence
Since the end of 2014, the strategic focus of EIOPA’s work on Solvency II has been on supervisory convergence, with the aim to ensure the highest consistency possible in the implementation of Solvency II across the EU. This is a project that has delivered state-of-the-art risk-based regulation in Europe, and which is the outcome of joint efforts by the co-legislators, regulators, supervisors and industry and consumer representatives. The European Parliament has played a key role in this process.
As a first step towards ensuring this consistency, in the past 12-month period, EIOPA delivered in total 18 Implementing Technical Standards (ITS), of which six have already been endorsed by the European Commission (EC). EIOPA also delivered two sets of Guidelines that cover the most relevant areas and elements of the Solvency II framework. Some of these Guidelines concern the basic alignment of supervisory processes, while others provide clarity to firms on supervisors’ expectations, while reducing the risk of divergent interpretations by national supervisors.
Consumer protection
Consumer protection is since day one an integral part of EIOPA’s DNA and continues to guide EIOPA’s priorities. EIOPA pursued works simultaneously on different issues that are crucial for consumer protection: transparency, conflicts of interest and conduct risks.
Preparing the future implementation of the new Insurance Distribution Directive EIOPA developed work on product oversight and governance by insurance undertakings. Insurers need to implement proper processes to deal with product design, development and marketing as well as to identify and manage consumer risks.
Furthermore, EIOPA started to develop a comprehensive risk-based and preventive framework for conduct of business supervision on a European level. Failures in business conduct can pose a serious threat to the stability of the financial sector, while mis-selling on a mass scale can lead to serious detriment to individual consumers. This can result in significant reputational damage for companies and for consumers in a material loss of confidence in the financial market.
Financial Stability
In line with its mandate, EIOPA continued to initiate and coordinate EU-wide stress tests with the purpose to assess the resilience of financial institutions to adverse market developments.
In November 2014, EIOPA completed an EU-wide stress test for insurance companies based on the upcoming Solvency II regime. EIOPA tested a range of credible adverse market scenarios, developed in conjunction with the ESRB, complemented by a set of independent insurance-specific shocks covering mortality, longevity, insufficient reserves and catastrophe shocks. An additional stress test module addressed the impact of a low yield environment.