Solvency II

Insurers raise concerns over EIOPA’s proposed changes to rules on technical provisions


Insurance Europe has today published its response to a consultation conducted by the European Insurance and Occupational Pensions Authority (EIOPA) on its proposed revision of guidelines on the valuation of technical provisions, which are the amount of capital that an insurer requires to fulfil its insurance obligations and settle all expected commitments to policyholders and other beneficiaries.

EIOPA's proposals raise concerns in several areas:

  • Implementation timeline — EIOPA intends to already apply the revised guidelines in 2022, with no transitional phase currently foreseen. Insurers that have not already implemented the details of the revised guidelines would, however, require a transitional period of at least three years. As all relevant resources are currently focussed on the implementation of International Financial Reporting Standard (IFRS) 17 — insurance contracts, an even a longer transitional period would in fact be welcomed, to avoid jeopardizing the timely implementation of IFRS 17.
  • Granularity — EIOPA has proposed to increase the granularity of technical provisions calculations. While EIOPA’s aim is to improve the calculation results via labour-intensive fine-tuning (on the part of insurers), its proposals are expected to result in very limited improvements in practice.
  • Distorted results — Some of EIOPA’s proposals could even force undertakings to apply unrealistic management actions which would result in distorted results: for example, guideline 40b on the consideration of new business in setting future management actions.
  • Lack of proportionality — Proportionality should be explicitly referenced throughout the guidelines.