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Group
Support Regime and Group Supervision
from the Solvency ii
Association, the largest Association of Solvency ii Professionals
in the world
Consultation
Paper No. 60
Draft CEIOPS’ Advice for Level 2 Implementing
Measures on Solvency II: Assessment of Group Solvency
1.
Introduction
1.1. Background
1.1. In its letter of 19 July 2007, the European
Commission requested CEIOPS to provide final, fully consulted advice
on Level 2 implementing measures by
October 2009 and recommended CEIOPS to develop Level 3 guidance on certain areas to foster
supervisory convergence.
On 12 June
2009 the European Commission sent a letter with further guidance
regarding the Solvency II project, including the list of
implementing measures and timetable until implementation.
1.2. This Consultation Paper provides advice for the Level
2 implementing measures referred to in Article 232 of the Solvency
II Level 1 text1 (herein “Level 1 text”).
Article
232 refers to the technical principles and methods set out in
Article 218 to 227 and the application of Articles 228 to
231.
1.3. The
scope of this advice includes therefore elements related to the
scope considered to asses the group
solvency (219, 223, 224, 225, 226, 227) and the calculation
methods of the group solvency (217, 218,
220, 221, 222, 225, 228, 229, 230, 231).
The last
set of articles include the calculation of the group SCR, either
with the accounting consolidation based method or the deduction and
aggregation method, and the assessment of available elements of own
funds, including the fungibility and transferability of own funds.
The advice
also addresses issues related to third country entities and/or
groups.
1.2. Group solvency assessment in QIS 4
1.2.1. Approaches tested in QIS 4
1.4. From
April to July 2008 CEIOPS conducted the fourth Quantitative Impact
Study on Solvency II (QIS4).
Groups
were extensively tested for the first time.
However,
it should also be noted that the group data were in general subject
to more caveats than the solo data.
1.2.2. Main findings regarding group solvency
assessment in QIS4
1.5. The
main findings regarding group solvency assessment in QIS4 can be
summarized as follows:
• Diversification effects varied considerably from one
group to another and depended strongly on the individual group
structure.
However,
with an average diversification effect of 21
percent, the effect appeared significant
nonetheless;
•
Diversification effects were greater for larger
groups than for smaller groups;
• The
calculation of group excess own funds under the Solvency II QIS 4
assumptions showed a slight increase compared
with Solvency I;
• The
study found that further work is needed on
transferability of assets, especially in relation to diversification
effects, elements stemming from third countries and the with-profits
parts of insurance groups;
• Not
enough groups reported data for group internal models to compare the
group SCR assessed with the standard formula and a “current”
internal model.
1.6.
This paper takes into account the results and comments from the QIS4
exercise in developing a Level 2 framework for group solvency.
It also
addresses some of the main valuation
difficulties that were expressed on particular areas of QIS
4.
Consultation Paper No. 60
Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency
II: Assessment of Group Solvency
1.
Assessment of Group Solvency - Introduction
2.
Level 1 Text
3.
Advice from CEIOPS
4.
Third Countries
5.
Calculation Method
6.
Fungibility and Transferability
7.
Transferability of Own Funds
8.
Calculations
9.
Annex 1 to Annex 5
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