Insurance Europe has today published its response to a consultation conducted by the European Insurance and Occupational Pensions Authority (EIOPA) on its proposed revisions to its guidelines on contract boundaries, which is a topic of great importance for the insurance market.
While EIOPA’s aim is to further clarify certain aspects of Article 18 the Solvency II Delegated Regulation, some of its proposals would, however, lead to confusion. The industry would therefore welcome further clarifications — in particular on how the proposed thresholds for the evaluation of the discernible effect of a guarantee have been defined — as well as further explanations about how EIOPA and national supervisory authorities (NSAs) intend to achieve convergent practices.
The industry is also concerned that EIOPA’s approach for the quantitative determination of the discernible effect of financial guarantees will generate extensive additional operational burden. It appears that a significant part of the determination of the discernibility of the effect will be left to the discretion of supervisors.
Finally, EIOPA’s proposal that NSAs may require a quantitative assessment from an insurer and that the result of this quantitative assessment should prevail should be removed. The proposed wording is redundant, as supervisors already have the power to request information from companies as part of the supervisory review process — and it could be interpreted as introducing a de facto supervisory approval on the treatment of contract boundaries and technical provisions.