Gabriel Bernardino, EIOPA’s chairman, said that EU co-legislators should consider giving the European Insurance and Occupational Pensions Authority (EIOPA) powers to "conduct an inquiry into a particular type of financial institution, type of product, or type of conduct, in order to support the independent assessment of supervisory practices."
Bernardino is also demanding a centralised oversight role for insurers’ internal models and wants EIOPA to have an enhanced supervisory role for large cross-border insurance groups.
On Solvency II, Bernardino said that the next two years will be "crucial for the success" of Solvency II.
Solvency II’s new capital rules have been delayed by disagreements over the treatment of long-term guarantees, however the European Parliament (EP) and EU Council reached a compromise agreement last year.
Consequently, an EU directive was adopted in December 2014 that sets the deadline for the implementation of Solvency II as January 1, 2016, said Bernardino.
“The real challenge will be to ensure that Solvency II is implemented in a consistent way throughout the EU,” said Bernardino.
“This requires effective and convergent supervision in all member states in order to ensure strong supervision throughout Europe and to prevent regulatory arbitrage and guarantee a level playing field in the internal market," he said.
Group supervisors, meeting as “colleges” and in 2014, EIOPA said that the colleges need to come to a “shared view of the risks”.
“That achievement will require more efforts from the group and solo supervisors to have the same understanding of the risk definitions and scoring methods,” Bernardino announced in a speech at the Hellenic Association of Insurance Companies.
The next step in Solvency II implementation will be the publication of the Delegated Acts by the European Commission (EC) this summer, Bernardino said.
EIOPA has advised the EC on these measures and has analysed the design and calibration of the capital requirements for certain long-term investments.
Consequently, Bernardino said: “EIOPA proposes an innovative solution in financial markets risk-based regulation: a more granular treatment of securitisations.”
To identify securitisations with a better risk profile, EIOPA has developed a set of criteria on structure, quality of the underlying assets, underwriting processes and transparency.
“Given the complexity and poor performance of some securitisations, especially those backed by subprime mortgages, securitisations are sometimes met with a degree of scepticism,” Bernardino noted.
“However, securitisations meeting the criteria developed by EIOPA have performed well in terms of low default rates. We are convinced that the envisaged capital charges will allow the insurance sector to provide meaningful long-term financing,” he added.
In 2014 EIOPA intends to stress test the industry.
“The aim of the exercise in 2014 will be to test the resilience of insurers regarding market risk under a combination of historical and hypothetical scenarios,” said Bernardino.
Insurance risk will be also tested and, as a follow-up to EIOPA’s “opinion on supervisory response to a prolonged low interest rate environment” EIOPA will also include a low yield element in the exercise.
The exercise will be launched on April 30 and in November Bernardino intends to release its results.