The European Insurance and Occupational Pensions Authority (EIOPA) has launched today the second series of consultations regarding its proposed report on biodiversity risk management, as well as on five legal instruments to reflect the changes expected to be introduced to the regulatory framework as part of the Solvency II review process.
The six consultations issued today cover topics ranging from biodiversity risk, sustainability risks and sustainability plans, diversity in insurers’ administrative, management or supervisory bodies, as well as updates to some existing guidelines and technical standards. The findings of the report and the five legal instruments will guide the implementation of the new features within the Solvency II framework to improve risk management and financial stability in the EU’s insurance sector.
EIOPA invites stakeholders to provide their feedback on the consultation papers listed below by responding to the questions via the online surveys no later than 26 February 2025. All responses will be published on EIOPA’s website unless otherwise requested.
- Consultation on a report on biodiversity risk management
Biodiversity loss can result in significant economic risks, affecting the value of investments, the frequency and intensity of insured losses, and the overall risk profile of insurers’ portfolios. EIOPA has identified a significant investment exposure in the insurance sector to assets dependent on nature and ecosystem services, which may indicate an exposure to biodiversity risks.
Considering these economic and financial impacts and dependencies on biodiversity, EIOPA proposes for consultation a report which looks at how insurers identify, measure and manage biodiversity risks, and assesses undertakings’ own risk and solvency (ORSA) practices. It aims at engaging supervisors and the insurance sector to adequately identify and address biodiversity loss risks.
- Consultation on Regulatory Technical Standards on management of sustainability risks including sustainability risk plans
In its proposal, EIOPA aims to limit the burden on undertakings and establish a coherent and proportionate approach to sustainability risk management. In this regard, the proposed Regulatory Technical Standards integrate the sustainability risk plans into existing risk management practices of undertakings, connect their sustainability plans with their transition plans, while allowing undertakings to disclose sustainability risks in a consistent and efficient manner.
The draft Regulatory Technical Standards specify the minimum standards and reference methodologies for the identification, measurement, management, and monitoring of sustainability risks, the elements to be covered in the plans, the supervision and disclosure of relevant elements of the plans.
- Consultation on guidelines regarding the notion of diversity for the selection of the members of the administrative, management or supervisory body
EIOPA’s proposed Guidelines define the notion of diversity to help insurance and reinsurance undertakings to put in place a policy promoting diversity for the selection of members of their administrative, management or supervisory bodies, as well as the quantitative objectives related to gender-balance.
- Consultation on revised guidelines on undertaking-specific parameters
The revised Guidelines include amendments to correct legal references and to clarify and streamline the text without changing its intended meaning. In particular, three Guidelines are deleted because their content is sufficiently clear from the legal provisions of Solvency II.
- Consultation on revised guidelines on market and counterparty risk exposures in the standard formula
The proposed amendments aim to specify the correct treatment of securities lending and borrowing transactions and repurchase or reverse repurchase agreements in the calculation of the counterparty default risk module of the Solvency Capital Requirement. In particular, three Guidelines are deleted, some Guidelines are amended to broaden their application, and a new Guideline is introduced to clarify the treatment of leveraged funds.
- Consultation on revised Implementing Technical Standards on the lists of regional governments and local authorities’ exposures to whom are to be treated as exposures to the central government
The proposed amendments add four new types of entities from France and Latvia to the list of regional governments and local authorities and remove UK entities. The entities listed in the Implementing Technical Standards will be treated like central governments in the calculation of the Solvency Capital Requirement with the standard formula, which means they receive a zero-capital charge for credit risk.
Background
Solvency II serves as the prudential framework for insurers and reinsurers across the EU. It is designed to protect policyholders and beneficiaries while safeguarding the stability of the European insurance sector through robust regulations and effective supervision.
In 2021, the European Commission initiated a comprehensive review of Solvency II to enhance the sector’s resilience to future crises, further strengthen policyholder protection, and simplify rules where appropriate. Following the adoption of the political agreement by the European Parliament and the Council, EIOPA is now providing draft legal instruments based on the mandates set out in the political agreement.