Insurance Europe has responded to a European Insurance and Occupational Pensions Authority (EIOPA) consultation which aims to provide guidance on the recognition of mass-lapse reinsurance and on reinsurance agreements’ termination clauses.
Mass-lapse reinsurance protects an insurer if a large number of policyholders cancel their insurance policies within a short period of time.
In its response, Insurance Europe reasons that while some guidance may be beneficial, EIOPA should refrain from adopting overly prescriptive requirements which go beyond existing legal requirements. This may discourage the use of reinsurance and could ultimately result in non-proportional reinsurance being unattractive for primary insurers.
Insurance Europe also notes:
➡️ There is a need for a recalibration of the mass-lapse parameter in the standard formula.
➡️ The one-year horizon measurement period for mass-lapse reinsurance is appropriate and does not create material basis risk.
➡️ EIOPA's considerations on exclusions and termination clauses should be materially revised to reflect legal and economic considerations.
➡️ The assessment of basis risk should be aligned t0 the specifications set out in the Solvency II delegated regulation.