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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
3.2. Membership
and participation in the College
Explanatory text
3.33. According to Article 252(2a) the membership of the college
shall include the group supervisor and
supervisory authorities of all the Member States in which the head
offices of all subsidiary undertakings are situated.
The supervisory authorities of significant branches and related
undertakings shall be allowed to participate
to the colleges of supervisors.
3.34. In its advice to the European Commission on aspects of the
Framework Directive Proposal related to Insurance Groups
(CEIOPS-DOC-25/08), CEIOPS advocated for the membership of all
supervisors in the College, as a way to ensure that decisions
taken are transparent and take into account the views and concerns
of all supervisors.
This is consistent with CEIOPS approach under Solvency I regime
where all subsidiaries’ supervisors are invited to the current
Coordination Committees (Co-cos).
3.35. On this issue, the financial crisis
showed that the whole group, directly or indirectly, may be
affected and therefore coordination and exchange of information
among supervisors is crucial.
3.36. CEIOPS considers that the provisions
on exchange of information in the Sienna protocol remain relevant
under Solvency
II. Those
provisions can be reflected in possible level 3 guidance.
3.2.1. Participation of supervisory authorities of significant EEA
branches
3.37. According to the Level 1 text, the
participation of significant branches shall only be limited to
achieving the objective of efficient exchange of information.
3.38. The participation of branches’ supervisory authorities in
the Colleges meetings may be necessary in order to assure a
permanent platform for cooperation and the coordination of
appropriate supervisor actions.
The participation of branch supervisors
could be especially foreseen in College’s meetings where issues
specific to that branch are discussed or where their participation
is relevant in terms of risks for the group or its systematic
relevance to local markets.
3.39. The Level 1 text foresees that the Commission shall adopt
implementing measures on the definition of a significant branch.
3.40. On this issue, and aiming to have as much as possible an
adequate level of cross-sector consistency, CEIOPS took into
consideration the Capital Requirements Directive (CRD) framework
and it recent improvements as well as the Financial Conglomerates
Directive (FCD).
3.41. Accordingly with the proposal for amending Directives
2006/48/EC and 2006/49/EC (article 42a) – CRD - the competent
authorities of a host Member State may make a request to the
consolidating supervisor where Article 129 (1) applies or to the
competent authorities of the home Member State, for a branch of a
credit institution to be considered as systemically relevant.
This request shall provide reasons for
considering the branch to be systemically relevant with particular
regard to the following:
3.42. (a) whether the market share of the branch of a credit
institution in terms of deposit exceeds 2% in the host Member
State;
(b) the likely impact of a suspension or closure of the operations
of the credit institution on the payment and clearing and
settlement systems in the host Member State;
(c) the size and the importance of the branch in terms of number
of clients within the context of banking or financial system of
the host Member State.
3.43. The FCD introduces the concept of
“relevant competent
authorities” (RCA)
which shall be involved in the identification of other RCAs, the
identification of the conglomerate and in exceptional cases in the
identification of the coordinator.
The coordinator who is in charge of compliance with the rules on
capital adequacy, of risk concentration and intra-group
transactions and internal control, shall consult the RCAs on the
details of the application of these rules.
Article 2.17 of the FCD states that RCAs’
shall mean:
(a) Member States' competent authorities responsible for the
sectoral group-wide supervision of any of the regulated entities
in a financial conglomerate;
(b) the coordinator appointed in accordance with Article 10 if
different from the authorities referred to in (a);
(c) other competent authorities concerned, where relevant, in the
opinion of the authorities referred to in (a) and (b); this
opinion shall especially take into account
• the market share of the regulated entities of the conglomerate
in other Member States, in particular if it exceeds 5 %
• and the importance in the conglomerate of any regulated entity
established in another Member State;
3.44. CEIOPS considers that a basic principle underpinning the
development of any criteria of significance for the participation
in the College of branches should include the significance of the
entity within the group and/or in their local market.
3.45.
CEIOPS also considers that there are two different approaches to
the participation of any branch’ supervisor in the College: the
branch’ supervisor asks on its own initiative to participate in
the College, or, in the absence of this request, the group
supervisor considers that its participation is relevant given the
significance of the undertaking within the group.
3.46. Where a supervisor from a member state with a branch of the
group presents a reasoned request to participate in the College,
CEIOPS considers that the branch supervisor should become a member
of the college unless properly justified by the group supervisor
following consultation with the other supervisory authorities
within the College.
In the case of diverging views, the branch supervisory authority
may refer the matter to the CEIOPS following the procedure
foreseen in article 252 (2b) of the Level 1 text.
3.47. On this issue, CEIOPS acknowledges that a quantitative
threshold for assessing the significant of branches would
facilitate a higher level of harmonisation, but, on the other
hand, could prevent an adequate level of flexibility.
3.48. As a result, CEIOPS considers that the ‘significance’ of a
branch should be based on the judgement of the group supervisor
following the consultation with the other supervisory authorities
within the College.
This judgement should be supported on
quantitative and qualitative criteria, for example:
• 2% threshold: if the market share exceeds 2% in the members
state or if its gross written premium volume exceeds 2% of the
gross written premium volume of the all group;
• Importance of the branch given the global risk profile of the
group (e.g. where the potential contribution of the branch to the
group SCR is above a material level);
• Supervisory authorities of newly entered branches in the groups
having in mind how will ultimately effect the group’s overall
operations;
• Supervisors that bring insight into the specific nature of local
governance cultures, that may have an impact both locally and/or
the group as a whole.
3.49. CEIOPS has undertaken some discussions on the
appropriateness of using 2% (based on the CRD) or 5% (based on the
FCD) as the indicative threshold.
On the one hand, it is important to assure a cross-sector
consistency.
However, Solvency II and the CRD are built on different business
models and the systemic relevance of branches is different in each
sector.
3.2.2. Participation of supervisory authorities of related
undertakings that are not subsidiaries
3.50. The Level 1 text article 252 (2a) does not foresee the
application of any significance criteria to the participation of
the supervisory authorities of related undertakings (entities
where there is significant but not a dominant influence).
On the other hand, the level 1 text states the same limitation as
the one applied on branches (i.e. limited to achieving the
objective of efficient exchange of information).
3.51. As a result, CEIOPS considers that also the participation of
these supervisors should be especially foreseen in the College’s
meetings where issues specific to that undertaking are discussed
or where their participation is relevant in terms of risks for the
group or in terms of systematic relevance for the local markets.
3.2.3. Participation of supervisory authorities of third countries
3.52. The Level 1 text does not refer to the participation of
third country supervisory authorities.
3.53. However, CEIOPS acknowledges the importance that third
countries insurance undertakings can have on some groups and
considers that their participation can be relevant in terms of
understanding the risks of the group.
The decision shall then be based on the
judgement of the group supervisor following consultation
with the other supervisory authorities in the College.
3.54. Special attention shall be given to the equivalence of
confidentiality requirements.
3.2.4. Participation of competent authorities of other sectors
3.55. For the competent authorities of other
financial sector entities (e.g. banking supervisors),
CEIOPS believes that their participation should consider the risks
for the group and should be up to the group supervisor, following
the consultation with the other supervisory authorities within the
College.
This should take into account the appropriateness of inviting the
competent authorities responsible for the sectoral group-wide
supervision of for example the banking sector (e.g. consolidating
supervisor) or the competent authorities of specific Member States
where that sector is highly significant to the group.
3.56. In case of third country competent
authorities, special attention shall be given to the equivalence
of professional secrecy standards.
3.57. A summary of the composition of Colleges is illustrated
below.
CEIOPS’ advice
3.58. CEIOPS considers that the
participation of supervisory authorities of significant branches,
related undertakings, third countries and competent authorities of
other financial sectors
should be foreseen in the College meetings
where issues specific to that undertaking are discussed or where
their participation is relevant in terms of risks for the group or
its systematic relevance to local markets.
3.59. Where a supervisor from a member state with a branch of the
group presents a reasoned request to participate in the College,
CEIOPS considers that the branch supervisor should become a member
of the college unless properly justified by
the group supervisor following consultation with the other
supervisory authorities within the College.
In the case of diverging views, the branch supervisory authority
may refer the matter to the CEIOPS following the procedure
foreseen in article 252 (4) of the Level 1 text.
3.60. Where no such request has been made,
the branch supervisor’s participation should be based on the
judgment of the group supervisor
following the consultation with the other supervisory authorities
within the College.
This judgment should be supported on
quantitative and/or qualitative criteria related to the
significance of the entity within the group and/or in their local
market, as for example:
• 2% threshold:
if the market share exceeds 2% in the members state or if its
gross written premium volume exceeds 2% of the gross written
premium volume of the all group;
• Importance of the branch given the
global risk profile of the group
(e.g. wherethe potential contribution of the branch to the group
SCR is above a material level);
• Supervisory authorities of newly entered branches in the groups
having in mind how will ultimately effect the group’s overall
operations;
• Supervisors that bring insight into the specific nature of local
governance cultures, that may have an impact both locally and/or
the group as a whole.
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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