'Supervisory action before SCR is breached goes beyond Solvency II’ - Insurance Europe

Written by Adam Cadle

23/02/2021

Supervisory action before an insurer breaches its solvency capital requirement (SCR) goes beyond Solvency II and creates an unlevel playing field in Europe, Insurance Europe has argued.

In its response to a consultation by EIOPA on its statement on supervisory practices and expectations in the case of an insurer breaching its SCR, Insurance Europe said: “The sector is supportive of the objective of supervisory convergence. However, convergence of supervisory practices must focus on supervisory actions, and not on delivering the same outcomes for all companies regardless of their circumstances. Rather, supervisory actions must consider the specific situation an individual insurer is facing, as this is crucial to facilitate a successful recovery.

“Moreover, EIOPA should clarify that non-compliance with the SCR starts only when the SCR ratio is below 100%. Early supervisory measures currently taken by NSAs before an actual breach go beyond the regulation and lead to an uneven playing field. Therefore, a minimum level of harmonisation within EU member states is required to ensure that supervisory measures only begin at the correct point.”

Insurance Europe also stressed that, although an analysis of the causes of a breach is necessary, the recovery plan should focus primarily on restoring compliance with the SCR.

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