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The Opinion is addressed and providing guidance to the national supervisory authorities, in particular to those of the 27 Member States (EU27) remaining in the European Union, linked with the authorisation process and on-going supervision of undertakings regulated under Solvency II. It is setting out principles in the areas of authorisation and approvals, governance and risk management, outsourcing of critical and important activities as well as on-going supervision including monitoring.
European Insurance and Occupational Pensions Authority (EIOPA) calls upon supervisors to ensure a sound authorisation process, supported by adequate resources in order to deal with the increased amount of requests for authorisation within a short period of time. The supervisors should apply a prospective and risk-based assessment of the authorisation taking into account the undertaking’s business model. Furthermore, uncertainties linked with the management of the business strategy should be carefully assessed. No automatic recognition of existing authorisations should be granted.
Governance arrangements should be assessed to guarantee effective decisiontaking and risk management and to allow for proper supervision. EIOPA expects undertakings to show an appropriate level of corporate substance and not display characteristics of an empty shell. The supervisors should carefully scrutinise any transfer of risks and require a minimum retention of risks from the authorised undertaking. As an indication, a minimum retention of 10 % of the business written could be envisaged.
EIOPA stresses that outsourcing of undertakings’ important functions is subject to the full responsibility of the administrative, management or supervisory body for the outsourced activity and that outsourcing shall not materially impair the quality of governance, increase operational risk, impair the ability of supervisors to monitor compliance or undermine continuous and satisfactory service to policyholders.
EIOPA advises supervisors to install appropriate monitoring tools to assess existing and arising risks and to conduct specific supervisory review in the course of the first years following authorisation to ensure the consistency with the initial business model.