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Consultation Paper
No. 62 - Draft CEIOPS’ Advice for Level 2 Implementing Measures on
Solvency II:
Cooperation and Colleges of supervisors -
CEIOPS-CP-62/09, 2 July 2009
Advice
3.1. Considering articles 252 and 253, the following issues are
identified in separate sub-sections in this advice:
a. Role of the College of Supervisors:
• Article 252 (1), states the group supervisor rights and duties,
having no decision-making powers been
attributed to the College of Supervisors
• Level 2 implementing measures in sub-section 3.1., the role of
the College of Supervisors
b. Membership and participation in the
College:
• Article 252 (2a, 1st and 2nd paragraphs) states that membership
to the College shall include the group supervisor and supervisory
authorities of all the Member States in which the head offices of
subsidiary undertakings are situated.
• The supervisory authorities of significant
branches and related undertakings shall also be allowed to
participate to the colleges of supervisors.
• Level 2 implementing measures in sub-section 3.2., the issue of
the participation of supervisory authorities of significant
branches and related undertakings with a focus on other financial
sector supervisors and third country supervisors;
c. Organization:
• Article 252 ((2a), 3rd paragraph) states that the effective
functioning of the College may require that some activities will
be carried out by a reduced number of supervisory authorities
within the College.
• Level 2 implementing measures/ Level 3 guidance address, in
sub-section 3.3., the issue of the organization and effective
functioning of the College;
d. Coordination arrangements:
• Article 252 (2b and 2c) state that the establishment and
functioning of colleges shall be based on coordination
arrangements determined by the group supervisor, following
consultation with the supervisory authorities concerned.
• Level 2 implementing measures in sub-section 3.4., the issue of
developing a convergent framework;
e. Professional secrecy and confidentiality:
• Article 257 states on professional secrecy and confidentiality.
• Level 2 implementing measures.
• Nevertheless not explicitly foreseen within the implementing
measures, the safe handling of confidential information was
considered by CEIOPS has a relevant issue needed to be addressed
within Level 2 implementing measures for cooperation and exchange
of information between supervisory authorities.
f. Cooperation and information sharing in
crisis situation:
• Article 253 (1) states that supervisory authorities shall
cooperate closely, including in cases where an insurance or
reinsurance undertaking encounters financial difficulties.
• Level 2 implementing measures in sub-section 3.6., how the
supervisory authorities shall cooperate in this situation.
g. Possible issues for Level 3 guidance in
3.7
3.1. Role of the Colleges of supervisors
Explanatory text
3.2. The College of Supervisors shall be a
permanent platform for cooperation and coordination dedicated to
enhance the exchange of information among supervisory authorities
involved.
It will aim at facilitating exchange of
information, views and assessments among supervisors in
order to allow for a more efficient and effective group and solo
supervision and timely action.
The College of Supervisors will enable supervisors to develop a
common understanding of the risk
profile of the group as the starting point for a risk based
supervision at both group and solo level.
3.3. The college shall then specially strive
to:
• Be a platform for cooperation and coordination
• Enhance the exchange of information
• Facilitate group-wide supervision
• Enhance solo supervision
• Facilitate convergence of supervisory practices
3.1.1. Platform for cooperation and coordination
3.4.
The College does not have any decision-making powers under the
Level 1 text.
Also the establishment of the College cannot prejudice any of the
powers and responsibilities of the supervisory authorities.
3.5. Nonetheless, CEIOPS believes that this does not prevent the
decision making process facilitated
by the College from being based as much as possible on the
consensual views reached within the College.
The decision making process of the College of Supervisors shall
then strive to achieve consensus/joint
decision.
3.1.2. Enhance the exchange of information
3.6. Article 252 of the Level 1 text states that one of the duties
of the group supervisor is the coordination of the gathering and
dissemination of relevant or essential information.
3.7. The duty of coordination of the
gathering and dissemination of relevant or essential information
for going concern and crisis situations shall also consider the
provisions on the exchange of information established in article
253 (cooperation and exchange of information between supervisory
authorities).
3.8. 39. According to article 253 (1) second paragraph,
supervisory authorities “(...) without prejudice to their
respective responsibilities, and whether or not established in the
same Member State, (...)shall provide one another with such
information in order to allow and facilitate the exercise of the
supervisory tasks of the other authorities under this Directive.
In this regard, the supervisory authorities concerned and the
group supervisor shall communicate without
delay to one another all relevant information as soon as it
becomes available.
The information referred to in this subparagraph includes, but is
not limited to, information about actions of the group and
supervisors, and information provided by the group.
3.9. Besides, “The authorities responsible for the supervision of
the individual insurance and reinsurance undertakings in a group
and the group supervisor shall each call immediately for a meeting
of all supervisors involved in group supervision in at
least the following cases:
(a) when they become aware of a significant breach of the Solvency
Capital Requirement or a breach of the Minimum Capital Requirement
of an individual insurance or reinsurance undertaking; or
(b) when they become aware of a significant breach of the Solvency
Capital Requirement at group level calculated on the basis of
consolidated data or the aggregated group Solvency Capital
Requirement, in accordance with which method according to Title
III, Chapter II, Section 1, Subsection 4, is used;
(c) when other exceptional circumstances occur or have occurred.
3.10. The Commission is seeking advice to adopt implementing
measures determining the items which are, on a systematic basis,
to be gathered by the group supervisor and disseminated to other
supervisory authorities concerned or to be transmitted to the
group supervisor by the other supervisory authorities concerned.
The advice should also specify the items essential or relevant for
supervision at group level with a view to enhancing convergence of
supervisory reporting.
3.11. In the context of supplementary supervision under the
Insurance Groups Directive (98/78/EC), CEIOPS has already
published as an Annex to CEIOPS’ Statement on the Role of the Lead
Supervisor, guidelines on information exchange between lead
supervisors and other competent authorities which distinguishes
between relevant and essential information and includes a table
providing an illustrative list of essential information.
CEIOPS believes that these guidelines are applicable for Colleges
and intends to further develop them in forthcoming Level 3
guidance.
3.12. The CEIOPS guidelines notes that:
•
“Essential information”
which supervisory authorities shall communicate on their own
initiative:
information shall be regarded as essential if it could materially
influence another supervisory authority assessment of the
financial soundness of a insurance or reinsurance undertaking.
• “Relevant information” which they shall communicate on request:
“Relevant information” is understood to mean
information that is relevant to the performance of another
supervisor’s obligations.
Members of the College of Supervisors should agree on the scope of
relevant information to be communicated, and may consider
specifying the content, format, and the manner in which
information will be exchanged (e.g. contacts, regular conference
calls, regular meetings, written agreements etc).
Supervisory authorities requesting information should state
clearly the purpose for which the information is requested.
This will help to assess its relevance.
3.13. The exchange of information could also be expected to cover
the elements of information necessary for
day-to-day supervision as well as the information material
to the assessment of the financial soundness of the (re)insurance
group, circulated upon the occurrence of pre-defined events.
Information exchanged amongst supervisors will be a subset of the
information available within the supervisory group and should be
proportionate to the informational needs of the recipient.
3.14. The College of Supervisors shall agree on how the
information gathered will be exchanged, in which form and how
frequently.
This could be agreed as part of the College coordination
arrangements.
It is important to avoid duplication of reporting as this can
result in supervisory burden on undertakings within a group
and information overload within supervisory authorities.
3.15. The group supervisor shall, following the consultation with
the other supervisory authorities, be responsible for the
co-ordination of the gathering and dissemination of information in
going concern and crisis situations.
3.16. The solo undertaking would be required
to submit to the solo supervisor all information needed to
discharge their duties in accordance with the Directive
(i.e. for the solo supervisor to undertake the solo supervisory
review process).
The solo supervisor would feed their views on the solo
undertaking's information upwards to the group supervisor which
would then be shared within the reduced number of supervisory
authorities that will carry out some activities and with the whole
college.
The group supervisor would also have the responsibility of
disseminating the relevant group information across the
college/supervisory teams for their consideration.
This process is outlined in the diagram below:
3.17. Having discussed what shall be considered relevant and
essential information, CEIOPS considers that depending on the
structure and circumstances of the group, information normally
considered relevant may become essential.
Therefore, CEIOPS will leave the College to decide whether
information is relevant or essential both in normal and crisis
situations relying on a risk based approach.
The process to perform that risk assessment should form part of
the College coordination arrangements.
3.18. Depending on the final CEIOPS advice on the group report to
supervisors (RTS) (CEIOPS-CP-58/09), the RTS can form the basis
for the exchange of information.
CEIOPS nevertheless considers that among others the following
information should be considered
essential or relevant:
• Significant changes in the group structure
and in the authorities involved in the groups’ supervision;
• Any breaches of the SCR or the MCR throughout the group over the
year should be immediately disseminated to all participating
supervisors including updates of any corrective actions according
to the supervisory ladder;
• Key group risks that could affect solo undertakings in future;
• Difficulties that have potentially significant effects within
the group, such as adverse developments, major sanctions and
exceptional measures taken by competent authorities, other
matters, paying due attention to how the group is organized
(centralized versus decentralized functions).
• Significant changes in the way information is reported to
different supervisors within a group and exchange of methodologies
used to review that information;
• The level of technical provisions, MCR and SCR (including
capital add-ons), and own-funds) along with the key assumptions
used to set the technical provisions or capital requirements (both
at group level and major solo undertakings in the group);
• Methodology for calculating the group SCR (i.e. by standard
formula, internal model or a combination of both, accounting
consolidation-based or deduction aggregation method);
• Rationale for any group SCR capital add-on;
• Details of the groups’ ORSA;
• Assessment of each individual solo undertaking in terms of the
solo undertaking's governance processes, systems and controls;
• Details on the groups’ system of governance, including risk
management and capital management etc;
• Details of (re)insurance groups’ mechanisms.
3.19. All the above essential and relevant information shall be
gathered by the group supervisor and disseminated to the other
supervisory authorities concerned and vice versa.
3.20. The College of Supervisors must also ensure that host
supervisors (e.g. branch supervisors) not included in the College
of Supervisors are kept informed about all essential and relevant
information, including any decisions taken by the College of
Supervisors.
3.21. Host supervisors irrespective of their participation in
College of Supervisors must ensure that home supervisors are kept
informed about all essential and relevant information.
3.22. CEIOPS is also aware of some cases where in the absence of
subsidiaries no College is established. However, the relevance of
branches may justify the establishment of some coordination
arrangements similar to Colleges that should then be chaired by
the home supervisor.
3.1.3. Facilitate group-wide supervision
3.23. The College of Supervisors shall assist the group supervisor
in assessing the financial soundness and governance of the group.
3.24. The group supervisor following the consultation with the
other supervisory authorities, shall also produce an overview of
the Group through a general top-down approach, supplemented with
input from the other supervisors, of the system used at the level
of the individual undertakings in terms of its:
a. Formal and operational structure;
b. Business strategy;
c. Overall standard of corporate governance of the group and an
assessment of its adequacy for the risk profile of the group,
including skills and propriety of management, main internal
systems, internal controls, remuneration policies, the overall
risk profile and the risk management of the group, auditing
processes and the assessment of the group ORSA;
d. Risks concentration and intra-group transactions;
e. Financial resources including the assessment of the SCR at
group level, liquidity management, the ability of the Group to
raise additional capital and the distribution of capital within
the Group.
3.25. The above referred overviews and findings should then be
discussed within the College.
3.26. The College of Supervisors will discuss and co-ordinate any
measures to be taken by the members of the College of Supervisors
against any insurance undertaking being part of a group, both in
regular and crisis situations, where appropriate.
3.1.4. Improve solo supervision
3.27. The College of Supervisors will improve solo supervision by
enhancing the gathering and sharing of
information.
This will result in solo supervisors having greater knowledge of
the group’s strategies, intra-group transactions, systemic risks,
etc and therefore help them in performing their tasks.
3.28. The College of supervisors shall also coordinate supervisory
actions especially in crisis situations in order to make them more
effective.
3.1.5. Facilitate convergence of supervisory practices
3.29. Article 70 (2) states that Member States shall ensure that
in the exercise of their duties supervisory authorities have
regard to the convergence in respect of supervisory tools and
supervisory practices in the application of the laws, regulations
and administrative requirements adopted pursuant to this
Directive.
3.30. The College shall strive to assure consistent supervisory
practices in the different jurisdictions.
CEIOPS’ advice
3.31. The College of Supervisors shall be a
permanent platform for cooperation and coordination dedicated to
enhance the exchange of information among supervisory authorities
involved.
It will aim at facilitating exchange of
information, views and assessments among supervisors in
order to allow for a more efficient and effective group and solo
supervision and timely action.
The College of Supervisors will enable supervisors to develop a
common understanding of the risk profile of the group as the
starting point for a risk based supervision at both group and solo
levels.
3.32. College shall strive to:
a. Be a platform for cooperation and
coordination
• The decision making process of the College of Supervisors shall
strive to achieve consensus/joint decision.
b. Enhance the exchange of information
• The College of Supervisors will agree on how and when
information gathered will be exchanged, and in which form.
• CEIOPS considers that depending on the structure and
circumstances of the group, relevant information may become
essential.
Therefore, the College should decide whether information is
relevant or essential both in normal and crisis situations relying
on a risk based approach.
The process to perform that risk assessment should be part of the
College coordination arrangements.
• Depending on the final advice on the group report to supervisors
(RTS), the RTS can form the basis for the exchange of information.
c. Facilitate group-wide supervision
• The College of Supervisors shall assist the group supervisor in
assessing the financial soundness and governance of the group.
d. Improve solo supervision
• College of Supervisors will improve solo supervision by
enhancing gathering and sharing of information.
This will result in solo supervisors having greater knowledge of
the group’s strategies, intra-group transactions and systemic
risks and therefore help them in performing their tasks.
• The College of supervisors shall also coordinate supervisory
actions especially in crisis situations in order to make them more
effective.
e. Facilitate convergence of supervisory
practices
Colleges of Supervisors:
Colleges of Supervisors - Introduction
Colleges of Supervisors - Advice
Colleges of Supervisors - Membership and Participation in the
College
Colleges of Supervisors - Coordination Arrangements
Colleges of Supervisors - Professional Secrecy and Confidentiality
Colleges of Supervisors - Coordination Cooperation
  
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