What changed between the draft committee report and the plenary report

Removed:Cross-border business is not inherently riskier than national business.

Added:▌

Removed:Directive 2009/138/EC

Added:▌

Removed:Article 1 – paragraph 1 – point 13, Article 29a – paragraph 1 – subparagraph 1 – point b – subparagraph 1 – point iii: (iii) the undertaking represents less than 10 % of the home Member State's non-life insurance market , where the market share is based on gross technical provisions;

Added:(63) Group supervisors may decide to exclude an undertaking from group supervision, in particular when such an undertaking is deemed of negligible interest with respect to the objectives of group supervision. EIOPA has noted diverging interpretations on the criterion of negligible interest, and has identified that, in some cases, such exclusions result in complete waivers of group supervision or in supervision at the level of an intermediate parent company. It is therefore necessary to clarify that such cases should only occur in very exceptional circumstances and that group supervisors should consult EIOPA before making such decisions. Criteria should also be introduced so that there is more clarity as to what should be deemed as negligible interest with respect to the objectives of group supervision.

Removed:Directive 2009/138/EC

Added:(64) There is a lack of clarity regarding the types of undertakings for which Method 2, namely a deduction and aggregation method as defined in Article 233 of Directive 2009/138/EC, may be applied when calculating group solvency, which is detrimental to the level-playing field in the Union. Therefore, it should be clearly specified which undertakings may be included in the group solvency calculation through Method 2. Such method should only apply to insurance and reinsurance undertakings, thirdcountry insurance and reinsurance undertakings, undertakings belonging to other financial sectors, mixed financial holding companies, insurance holding companies, and other parent undertakings the main business of which is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance or reinsurance undertakings, or third-country insurance or reinsurance undertakings.

Removed:Article 1 – paragraph 1 – point 13, Article 29a – paragraph 1 – subparagraph 1 – point b – subparagraph 1 – point iv: (iv) the sum of the annual gross written premiums in classes 4 to 7, 14 and 15 of Section A of Annex I is not higher than 30 % of total annual gross written premiums of non-life business;

Added:(65) In some insurance or reinsurance groups, an intermediate parent undertaking other than an insurance or reinsurance undertaking or a third-country insurance or reinsurance undertaking acquires and holds participations in subsidiary undertakings where those undertakings are exclusively or mainly third-country insurance or reinsurance undertakings. Under current rules, if those intermediate parent undertakings do not hold a participation in at least one insurance or reinsurance subsidiary undertaking which has its head office in the Union, they are not treated as insurance holding companies for the purpose of group solvency calculation, although the nature of their risks are very similar. Therefore, rules should be amended so that such holding companies of third-country insurance or reinsurance undertakings are treated in the same manner as insurance holding companies for the purpose of group solvency calculation.

Removed:Change excludes car insurance.

Added:(66) Directive 2009/138/EC, and Commission Delegated Regulation (EU) 2015/35 provide four methods of inclusion in the group solvency calculation of undertakings belonging to other financial sectors, including methods 1 and 2 set out in Annex I to Directive 2002/87/EC. This leads to inconsistent supervisory approaches and an uneven playing field, and generates undue complexity. Therefore, rules should be simplified so that undertakings belonging to other financial sectors always contribute to the group solvency by using the relevant sectoral rules regarding the calculation of own funds and capital requirements. Those own funds and capital requirements should simply be aggregated to the own funds and capital requirements of the insurance and reinsurance part of the group.

Removed:Directive 2009/138/EC

Added:(67) Under current rules, participating insurance and reinsurance undertakings are granted limited possibilities to use simplified calculations for the purpose of determining their group solvency when method 1, namely accounting consolidation-based method, is used. This generates disproportionate burden, in particular when groups hold participations in related undertakings that are very small in size. Therefore, subject to prior supervisory approval, participating undertakings should be allowed to integrate related undertakings whose size is immaterial in their group solvency by using simplified approaches.

Removed:Article 1 – paragraph 1 – point 13, Article 29a – paragraph 1 – subparagraph 1 – point b – subparagraph 1 – point v: (v) investments in non-traditional investments do not represent more than 30% of total investments;

Added:(68) The concept of encumbrance which should be taken into account when classifying own-fund items into tiers is not specified. In particular, it is unclear how that concept applies to insurance holding companies and mixed financial holding companies which do not have policyholders and beneficiaries as direct clients. Therefore, minimum criteria should be introduced to allow for the identification of cases where an own-fund item issued by an insurance holding company or a mixed financial holding company is clear of encumbrances.

Removed:Directive 2009/138/EC

Added:(69) The scope of the undertakings which should be taken into account when calculating the floor for the group Solvency Capital Requirement should be consistent with the scope of undertakings contributing to the eligible own funds that are available to cover the consolidated group Solvency Capital Requirement. Therefore, when calculating the floor, third-country insurance and reinsurance undertakings, insurance holding companies, thirdcountry insurance holding companies and mixed financial holding companies should be taken into account.

Removed:Article 1 – paragraph 1 – point 13, Article 29a – paragraph 1 – subparagraph 1 – point b – subparagraph 1 – point vi: (vi) the reinsurance business accepted by the undertaking does not exceed 50 % of its total gross written premium income.

Added:(70) The formula for calculating the minimum consolidated group Solvency Capital Requirement may lead to situations where that minimum is close, or even equal, to the consolidated group Solvency Capital Requirement. In such cases, non-compliance with that minimum may occur although compliance with the consolidated group Solvency Capital Requirement is ensured. Such unintended consequence should be avoided. Therefore, the calculation formula should be amended so that, similarly to individual insurance and reinsurance undertakings, the minimum consolidated group Solvency Capital Requirement is never higher than 45% of the consolidated group Solvency Capital Requirement.

Removed:Directive 2009/138/EC

Added:(71) For the purpose of group solvency calculation, insurance holding companies and mixed financial holding companies should be treated as insurance or reinsurance undertakings. This implies calculating notional capital requirements for such undertakings. However, such calculations should never imply that insurance holding companies and mixed financial holding companies are required to comply with those notional capital requirements at the individual level.

Removed:Article 29a – paragraph 1 – subparagraph 1 – point b – subparagraph 1 – point vi a (new)

Added:(72) There is no legal provision specifying how to calculate group solvency when a combination of Method 1 and Method 2 is used. This leads to inconsistent practices and uncertainties, in particular in relation to the way of calculating the contribution to the group Solvency Capital Requirement of insurance and reinsurance undertakings included through Method 2. Therefore, it should be clarified how group solvency is to be calculated when a combination of methods is used. In order to avoid material increases in capital requirements, it should be clarified that, for the purpose of calculating the consolidated group Solvency Capital Requirement, no equity risk capital charge is to be applied to such holdings. For the same reason, currency risk charge should only be applied to the value of those holdings that is in excess of the Solvency Capital Requirements of those related undertakings. Participating insurance or reinsurance undertakings should be allowed to take into account diversification between that currency risks and other risks underlying the calculation of the consolidated group Solvency Capital Requirement.

Removed:Article 1 – paragraph 1 – point 13: (vi a) the Solvency Capital Requirement is complied with and a capital add-on in accordance with Article 37 has not been set.

Added:(73) Currently, group supervisors may determine thresholds above which intra-group and risk concentration are deemed significant based on Solvency Capital Requirements, technical provisions, or both. However, other risk-based quantitative or qualitative criteria, for instance eligible own funds may also be appropriate for determining the thresholds. Therefore, group supervisors should have more flexibility when defining a significant intra-group transaction or a significant risk concentration.

Removed:Undertakings should be in a sound financial position in order to be classified as a low-risk profile undertaking.

Added:(74) Group supervisors may miss important information on intra-group transactions that are not required to be reported under current rules, in particular those involving third-country insurance and reinsurance undertakings, insurance holding companies and mixed financial holding companies. Therefore, the definition of ‘intra-group transactions to be reported’ should be reviewed. In addition, group supervisors should have the power to tailor the definition of ‘intra-group transactions to be reported’ so that it better fits the specificities of each group.

Removed:Directive 2009/138/EC

Added:(75) Insurance holding companies and mixed financial holding companies can be parent undertakings of insurance or reinsurance groups. In that case, the application of group supervision is required on the basis of the consolidated situation of such holding companies. As the insurance or reinsurance undertakings controlled by such holding companies are not always able to ensure compliance with the requirements on group supervision, it is necessary to ensure that group supervisors have the appropriate supervisory and enforcement powers to ensure compliance by groups with Directive 2009/138/EC. Therefore, similar to amendments to Directive 2013/36/EU of the European Parliament and of the Council introduced by Directive (EU) 2019/878 of the European Parliament and of the Council for credit and financial institutions, group supervisors should have a minimum set of powers over holding companies, including the general supervisory powers that are applicable to insurance and reinsurance undertakings for the purpose of group supervision.

Removed:Article 1 – paragraph 1 – point 13, Article 29a – paragraph 1 – subparagraph 1 – point b – subparagraph 2: deleted

Added:(76) Where insurance and reinsurance undertakings are part of a group whose parent undertaking has its head office in a third country that is not deemed equivalent or temporarily equivalent in accordance with Article 260 of Directive 2009/138/EC, exercising group supervision is more challenging. Group supervisors may decide to apply so-called “other methods” in accordance with Article 262 of that Directive. However, those methods are not clearly defined and the objectives that those other methods should achieve are uncertain. Therefore, the purpose of the other methods should be further specified, including a minimum set of measures that group supervisors should consider.

Removed:Addressed via the amended definition of low-risk profile undertaking.

Added:(77) Commission Delegated Regulation (EU) 2019/981 introduced a preferential treatment for long-term investments in equity. The duration-based equity risk submodule, which also aims at reflecting the lower risk of investing over a longer time horizon, but is of very limited use in the Union, is subject to criteria that are stricter than those applicable to long-term equity investments. Therefore, the new prudential category of long-term equity investments appears to obviate the need for the existing duration-based equity risk submodule. As there is no need to keep two distinct preferential treatments which have the same objective of rewarding long-term investments, the duration-based equity risk submodule should be deleted. However, in order to avoid a situation whereby those amendments lead to adverse effects, a grandfathering clause should be provided for with respect to insurers which are currently applying the duration-based equity risk submodule.

Removed:Directive 2009/138/EC

Added:(78) Achieving the environmental and climate ambitions of the Green Deal requires the channelling of large amounts of investments from the private sector, including from insurance and reinsurance companies, towards sustainable investments. The provisions of Directive 2009/138/EC on the capital requirements should not impede sustainable investments by insurance and reinsurance undertakings but should reflect the full risk of investments in environmentally harmful activities. While there is not sufficient evidence at this stage on risk differentials between environmentally or socially harmful and other investments, such evidence may become available over the next years. In order to ensure an appropriate assessment of the relevant evidence, EIOPA should monitor and report by 2023 on the evidence on the risk profile of environmentally or socially harmful investments. Where appropriate, EIOPA’s report should advise on changes to Directive 2009/138/EC and to the delegated and implementing acts adopted pursuant to that Directive. EIOPA may also inquire whether it would be appropriate that certain environmental risks, other than climate change-related, should be taken into account and how. For instance, if evidence so suggests, EIOPA could analyse the need for extending scenario analyses as introduced by this Directive in the context of climate change-related risks to other environmental risks.

Removed:Article 29a – paragraph 1 – subparagraph 1 – point c – subparagraph 1 – introductory part

Added:(79) Climate change is affecting and will affect at least over the next decades the frequency and severity of natural catastrophes which are likely to further aggravate due to environmental degradation and pollution. This may also change the exposure of insurance and reinsurance undertakings to natural catastrophe risk and render invalid the standard parameters for natural catastrophe risk set out in Delegated Regulation (EU) 2015/35. In order to ensure that there is no persistent discrepancy between the standard parameters for natural catastrophe risk and the actual exposure of insurance and reinsurance companies to such risks, EIOPA should review regularly the scope of the natural catastrophe risk module and the calibrations of its standard parameters. For that purpose, EIOPA should take into account the latest available evidence from climate science and, where discrepancies are found, it should submit an opinion to the Commission accordingly.

Removed:Article 1 – paragraph 1 – point 13: (c) For insurance undertakings pursuing both life and non-life insurance activities in accordance with Article 73, all of the following criteria shall be met:

Added:(80) The requirements set out in Article 308b(12) of Directive 2009/138/EC should be amended to ensure consistency with the banking framework and a level playing field in the treatment of exposures to Member States' central governments or central banks denominated and funded in the domestic currency of any Member State. For this purpose, a grandfathering regime for such exposures should be introduced to exempt the relevant exposures from spread and market concentration risk capital charges, provided that the exposures were incurred before 1 January 2020.

Removed:Simplification of the regime.

Added:(81) In some cases, insurance or reinsurance groups heavily rely on the use of the transitional measure on the risk-free interest rates and of the transitional measure on technical provisions. This may misrepresent the actual solvency position of the group. Therefore, insurance or reinsurance groups should be required to disclose the impact on their solvency position of assuming that own funds stemming from those transitional measures are not available to cover the group Solvency Capital Requirement. Supervisory authorities should also have the power to take appropriate measures so that the use of the measures appropriately reflects the financial position of the group. Those measures should however not affect the use by related insurance or reinsurance undertakings of those transitional measures when calculating their individual Solvency Capital Requirement.

Removed:Directive 2009/138/EC

Added:(82) Directive 2009/138/EC provides for transitional measures for the risk-free interest rates and on technical provisions which are subject to supervisory approval and which apply with respect to contracts that give rise to the insurance and reinsurance obligations that were concluded before 2016. While the transitional measures should encourage undertakings to move as timely as possible towards compliance with that Directive, the application of transitional measures approved for the first time long after 2016 are likely to slow down the path to compliance with that Directive. Such approval of the use of those transitional measures should therefore be restricted to cases where an insurance or reinsurance undertaking becomes for the first time subject to the rules of Directive 2009/138/EC and, where an undertaking has accepted a portfolio of insurance or reinsurance contracts and the transferring undertaking applied a transitional measure with respect to the obligations relating to that portfolio, before the transfer.

Removed:Article 1 – paragraph 1 – point 13, Article 29a – paragraph 1 – subparagraph 1 – point c – subparagraph 1 – point iii: (iii) the undertaking represents less than 10 % of the home Member State's life insurance market respectively, where the life insurance market share is based on gross technical provisions, or less than 10 % of the home Member State's non-life insurance market, where the non-life market share is based on gross written premiums;

Added:(83) The United Kingdom became a third country on 1 February 2020 and Union law ceased to apply to and in the United Kingdom on 31 December 2020. Given that Directive 2009/138/EC has several provisions that address the specifics of particular Member States, where such provisions specifically concern the United Kingdom, they have become obsolete and should therefore be deleted.

Removed:Directive 2009/138/EC

Added:(83a) The calibrations used for the delegated acts and implementing acts adopted by the Commission are often based on data that is heavily influenced by the inclusion of data from the United Kingdom market. Therefore, all calibrations that are input for the calculations of the Solvency Capital Requirement and the Minimum Capital Requirement should be reviewed to determine whether they are dependent on UK data and, where applicable, UK data should be eliminated from the relevant data sets, unless no other data is available.

Removed:Article 1 – paragraph 1 – point 13, Article 29a – paragraph 1 – subparagraph 1 – point c – subparagraph 1 – point iv: deleted

Added:(84) Directive 2009/138/EC should therefore be amended accordingly,

Removed:Directive 2009/138/EC

Added:HAVE ADOPTED THIS DIRECTIVE:

Removed:Article 1 – paragraph 1 – point 13, Article 29a – paragraph 1 – subparagraph 1 – point c – subparagraph 1 – point v: (v) business underwritten in Member States other than the home Member State where the undertaking received its authorisation in accordance with Article 14 is not higher than 25 % of its total annual gross written premium;

Added:Amendments to Directive 2009/138/EC

Change 2

Changed:Directive 2009/138/EC is amended as follows:

Change 3

Removed:Article 1 – paragraph 1 – point 13, Article 29a – paragraph 1 – subparagraph 1 – point c – subparagraph 1 – point vi: (vi) the sum of the annual gross written premium in classes 4 to 7, 14 and 15 of Section A of Annex I is not higher than 30 % of total annual gross written premiums of non-life business;

Added:(1) in Article 2(3), point (a) (iv) is replaced by the following:

Removed:Excludes car insurance.

Added:‘(iv) types of permanent health insurance not subject to cancellation currently existing in Ireland;’;

Removed:Directive 2009/138/EC