What changes does the Draft contain?
The Draft contains changes that aim to:
- strengthen the principle of proportionality by, inter alia, increasing the parameters for identifying those insurance undertakings that are excluded from the scope of the Solvency II Directive, or by identifying low-risk profile undertakings to which reduced supervisory requirements will apply;
- improve the quality of supervision by, inter alia, exchanging information between national supervisory authorities, through the European Insurance and Occupational Pensions Authority (EIOPA) on authorisation refusals to take up the business of insurance or reinsurance, or by granting additional supervisory powers to national supervisory authorities (e.g. power to request removal from office of the person who effectively runs the undertaking or key function holder);
- improve reporting rules by, inter alia, modifying the structure of the Solvency and Financial Condition Report ("SFCR”) by splitting its content into a part addressed to policyholders and a part addressed to other stakeholders, or by introducing a requirement to audit the balance sheet disclosed as part of SFCR (also single SFCR);
- lay down long-term guarantee measures which, inter alia, aim to mitigate the effects of short-term market fluctuations on the solvency positions of insurance undertakings and thus encourage these undertakings to finance the economy in a sustainable way over the long term;
- introduce macro-prudential tools to address systemic risks by, inter alia, taking into account macro-prudential aspects when conducting its own risk and solvency assessment and in its investment strategy, or granting supervisory authorities powers to intervene in the event of liquidity problems;
- integrate sustainability risks into the activities of supervised entities by, inter alia, requiring insurance undertakings to conduct a climate change risk exposure analysis or to assess the impact of long-term climate change scenarios on their business;
- improve the group and cross-border supervision by, inter alia, defining a framework for cooperation between the home and host supervisory authorities of insurance undertakings with significant cross-border activities and by bringing insurance holding companies and mixed financial holding companies directly into the scope of the EU prudential framework.
When will the amendments set out in the Draft become effective?
EU member states will have 18 months from the entry into force of the Directive covered by the Draft to implement the changes introduced by the Directive into their legal order. The Draft is currently before the Council of the European Union.
For further information on the upcoming changes for insurance and reinsurance undertakings, contact your CMS client partner or CMS experts – Ewa Świderska, Sylwia Raszplewicz-Czyżewska, Patrycja Sikorska-Tuğcu.
 Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).
 Proposal for a Directive of the European Parliament and of the Council amending Directive 2009/138/EC as regards proportionality, quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks, group and cross-border supervision.
 In connection with the review, the Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of insurance and reinsurance undertakings and amending Directives 2002/47/EC, 2004/25/EC, 2009/138/EC, (EU) 2017/1132 and Regulations (EU) No 1094/2010 and (EU) No 648/2012 was published. The Proposal will not be included in the article due to the limited form of the article.