Verzekeringen & Asset Management update – augustus (Engels)
  • woensdag, 26 augustus 2020

Verzekeringen & Asset Management update – augustus (Engels)

Insurance

DNB on Consolidation of Financial Conglomerates under Solvency II

The Dutch Central Bank (DNB) revised the treatment of intra-group relationships for own funds reporting under Solvency II. The elimination of certain transactions between an insurance company and entities from ‘other financial sectors’, such as banks, within the same group require special attention. Since the own funds of the total company are included in the group balance sheet, an adjustment is required to remove the effects of intragroup transactions, in case these transactions had an (in)direct impact on the group equity.

Consequently, insurers are required to include the figures of their bank subsidiaries in the calculation of the solvency ratio for the group figures. As a result of the revised regulation, several insurers with a banking subsidiary experience a reduction of the solvency ratio. The change needs to be implemented by latest Q4 2020 according to the DNB.

 

IASB publishes the final amendments to IFRS 17

The International Accounting Standards Board (IASB) published the final amendments to one of the most impactful accounting standards in the insurance industry, IFRS 17. By simplifying or revising certain requirements as well as providing reliefs when applying IFRS 17 for the first time, the Board attempts to:

  • Reduce costs
  • Make the results easier to explain and
  • Ease the transition

Both IFRS 17 and IFRS 9 for insurance companies will take effect on 1 January 2023.

 

EIOPA Discussion Paper on Methodological Principles Insurance Stress Testing

Following up on the first methodological paper on insurance stress testing, the European Insurance and Occupational Pensions Authority (EIOPA) asks for comments from the industry regarding the following three topics:

  • Stress test framework on climate change
  • Approach to liquidity stress testing
  • Multi-Period framework for the bottom-up insurance stress testing

The last one refers to a simulated stress over 3-5 years allowing for persistent stress (low interest rate environment) and dynamic evolvements (economic decline and recovery). The goal of the discussion paper is to enhance the stress testing toolbox of competent authorities. The deadline for the comments on the discussion paper is 2 October 2020. The first published paper back in 2019 describes the approach to stress testing, which can be bottom-up (entities calculate the effects of stress scenarios themselves) or top-down (supervisor using entities’ models to calculate the stress effect on insurer).

 

EIOPA statement on supervisory treatment of schemes based on reinsurance, regarding COVID-19 and credit insurance

Considering the various national schemes in the area of credit insurance and its implementation in the temporary framework, EIOPA published a supervisory statement on the recognition of those schemes under Solvency II. To ensure a level playing field, EIOPA recommends national supervisors to allow insurers to consider risk transfer to member states as reinsurance. Insurance companies must clearly indicate in their reporting where this assumption of state backed reinsurance is used. This reinsurance activity is only allowed for insurers, reinsurers and governments of member states.

 

Contact us

Please contact Mark van Maaren or Nicolas Ziob for more information about insurance stress testing or regulatory changes.

 

Asset Management

IOSCO consults on AI/ML guidance for market intermediaries and asset managers

The International Organization of Securities Commissions (IOSCO) has published its proposed guidance on the regulation and supervision of the use of Artificial Intelligence (AI) and Machine Learning (ML). These technologies are used by market intermediaries and asset managers, since they may result in a cost reduction for investment services and a boost of execution speed.

To mitigate potential risks and prevent a negative impact on consumers, the guidance proposes a few measures to create a regulatory framework. Among others, these measures aim to ensure:

  • Appropriate governance, controls and oversight frameworks over the development, testing, use and performance monitoring of AI and ML
  • Adequate knowledge, skills and experience of the staff to implement, oversee, and challenge the outcomes of AI and ML

 

ESMA’s third EU-wide CCP stress test finds overall resilience to shocks and multiple defaults

The European Securities and Markets Authority (ESMA) has published the results of the stress test applied to Central Counterparties (CCPs) in the EU. These results demonstrate the overall resilience of the CCPs to common shocks and multiple defaults for credit, liquidity and concentration stress risks. The new concentration stress component focused on the need for CCPs to consider liquidation cost within their risk frameworks. In addition, during the exercise ESMA monitored the impact of the Covid-19 outbreak, which increased market volatility, on the CCPs, which remained resilient during this crisis.

 

Contact us

Please contact Lennard Beijering or Bas van Oers regarding stress testing or the use of Machine Learning in asset management.