Global Financial Strategy - Eiopa unveils Solvency II calibrations

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Eiopa unveils Solvency II calibrations

Monday 12 December 2011 – by [email protected]

The European Insurance and Occupational Pensions Authority has issued recommendations described by chairman Gabriel Bernardino as a “major step” in finalising the Solvency II directive.

On Monday, Eiopa released a report detailing how both premium and reserve risk factors are calibrated in the directive which will overhaul the insurance sector’s capital adequacy regime.

Drafted by a joint working group set up by the EU regulator, the paper changes all but one of the risk weights related to non-life and health-non-similar-to-life technique calibrations from levels that were set out under the QIS5 trial, or fifth quantitative impact study.

As a result, the calibration for premium and reserve risk factors applied to credit and suretyship sees a large fall, with similar declines in the risk for fire and property and for general liabilities. Staff compensation is one of the few segments where risk factors increased.

“This report represents a major step in the Solvency II calibration and I am particularly happy that the methodology and proposed calibrations were agreed between supervisors and industry”, said Bernardino.

The working group consisted of representatives from the Association of Mutual Insurers and Insurance Cooperatives in Europe, Group Consultatif, the European Insurance and Reinsurance Federation and the CRO Forum, as well as observers from the European Commission.

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Moody’s urges caution on QIS5 results

Eiopa argues the report presents a “significantly improved calibration methodology”, ensuring that the final factors are “reflective of the average size of the portfolios of insurers in the European markets to which they are applied”.

The recommended levels have already been sent to the European Commission as it prepares its draft proposals for the implementing measures of Solvency II.

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