The European Insurance and Occupational Pensions Authority (EIOPA) issued on 17 March 2020 a statement addressed to the EU insurance sector acknowledging the significant consequences for financial services that the Coronavirus/COVID 19 situation may cause and informing about the actions that should be taken by insurers and that will be taken by EIOPA to help insurers to curb the impact of CoronaVirus/COVID-19 on the insurance business and to guarantee the policyholders protection. These actions are focused on two main business aspects: Business continuity and solvency and capital position.
Anticipating difficult market and operating conditions, EIOPA urges insurance companies to maintain the services to the clients, implementing, if necessary, measures to preserve the business continuity.
In order to provide operational relief to insurance companies, EIOPA will:
- Coordinate the national competent authorities (“NCAs”) to be flexible regarding reporting requirements timings. Specifically the NCAs shall relax the deadlines to submit supervisory reports and public disclosure regarding end 2019.
- Proceed to (i) limit its requests for information and consultations to the industry to essential elements needed to assess the effects of COVID-19 crisis on the insurance market, (ii) extend the deadline of the Holistic Impact Assessment for the 2020 Solvency II Review until 1 June 2020 and (iii) communicate in the coming days details on postponing deadlines re additional reporting and information requirements.
Solvency and capital position
- Insurance companies are reminded about the obligation to hold enough own funds on an on-going basis to cover their Solvency Capital Requirement. This will allow insures to absorb significant losses and therefore give confidence to policyholders and beneficiaries.
- EIOPA also advises insurers to implement policies to preserve their capital position in balance with the protection of the insured. Among others, prudent dividend, variable remuneration and other distribution policies.
- As a reassuring message, EIOPA states that the results of recent stress tests showed that the insurance sector is well capitalized and is able to withstand this kind of plausible and severe situations. In any case, EIOPA recalls that Solvency II framework:
- Provides a graduation of the supervisory intervention regarding Solvency Capital Requirements and Minimum Capital Requirement that would allow flexibility in cases of exceptional situations. For instance, the recovery period of affected insurance companies could be extended by the corresponding NCA.
- Also includes certain tools to mitigate risks and impacts to the insurance sector that will be used, if necessary, by EIOPA and by the NCAs to ensure that policyholders remain protected and that the financial stability is safeguarded.
Finally EIOPA concludes its statement by informing about the ongoing and closely monitoring of the CoronaVirus/COVID-19 crisis in coordination with national authorities, other European Supervisory Authorities and with the European Systemic Risk Board that will allow EIOPA to take, if necessary, additional actions to mitigate the impact of the market volatility on the insurance sector in Europe and to safeguard the protection of policyholders.