Welcome to the
Solvency
ii Association
the
largest association of Solvency ii Professionals in the
world
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
3.5. Professional secrecy and confidentiality
Explanatory text
3.84. According to the recital on article 252, the activities of
the College shall be proportionate to Article 257 states that:
Member states shall authorise the exchange
of the information between their supervisory authorities and
between their supervisory authorities and other authorities, as
referred to in Articles 253 to 256.
Information received in the framework of group supervision, and in
particular any exchange of information between supervisory
authorities and between supervisory authorities and other
authorities which is provided for in this Title, shall be subject
to the provisions on professional secrecy and communication of
information laid down in Article 297.
3.85. Since there is
no uniform European framework for the handling of confidential
information, it is up to individual supervisors to ensure the
security of such information.
3.86. Supervisors participating in the Colleges are encouraged to
make arrangements to facilitate the use of encrypted IT systems.
3.87. The information exchange between supervisors shall take into
account national laws and regulations concerning professional
secrecy and existing bilateral or multilateral MoU.
3.88. The authorities of third countries may participate in
information sharing subject to the directive requirements on the
equivalence of third country supervisory and prudential regimes
and professional secrecy provisions.
CEIOPS’ advice
3.89. Supervisors shall ensure the safe
handling of confidential information.
3.90. The authorities of third countries may participate in
information sharing subject to the directive requirements on the
equivalence of third country supervisory and prudential regimes
and professional secrecy provisions.
3.6. Cooperation and information sharing in crisis situations
Explanatory text
3.91. Article 253 (1) states that the authorities responsible for
the supervision of the individual insurance and reinsurance
undertakings in a group and the group supervisor shall cooperate
closely, in particular in cases where an insurance or reinsurance
undertaking encounters financial difficulties.
As stated in article 252(2b) the functioning of the College of
Supervisors shall be based on coordination arrangements (see
section 3.3) concluded by the group supervisor and the other
supervisor authorities concerned.
These coordination arrangements should
address both regular and emergency situations.
The coordination and cooperation should be developed in these
coordination arrangements to enhance
the preparedness in normal times and deal with the different
natures and stages of a crisis, while preserving the sufficient
flexibility and time to deal with the specific circumstances of a
crisis.
3.92.
An insurance undertaking in crisis can be defined as potentially
being partially or totally unable to settle its claims and to pay
to its policyholders their benefits.
3.93. The Memorandum of Understanding on
Cooperation between the Financial Supervisory Authorities, Central
Banks and Finance Ministries of the European Union on Cross-Border
Financial Stability (“the Crisis MoU”) of 1 June 2008 was entered
into in order to ensure cooperation in financial crisis between
the parties through appropriate procedures for sharing of
information and assessments preparing them for the management and
resolution of a cross-border financial crisis.
3.94. The role of the supervisory authorities may vary depending
upon the nature and stage of a crisis.
The coordination arrangements should concentrate on the work of
the Colleges related to insurance undertakings and insurance
groups, but they should also take into account the role of
insurance supervisory authorities in case of a crisis in a
cross-sectoral group or in several cross-sectoral groups.
The Crisis MoU establishes the basis for the cooperation with
other financial supervisory authorities within the banking and
securities sectors as well as finance ministries and central
banks.
3.95. Following the current financial crisis CEIOPS launched a
lessons to be learnt project in the autumn 2008 where the working
groups have looked into the crisis, analysed different aspects
related to the insurance sector, including cooperation among
supervisors in relation to the supervision at the level of the
group, and indentified potential areas for improvement to ensure
that Solvency II can operate both in normal and stressed times.
The Insurance Groups Supervision Committee has also performed
“case studies” to examine the functioning of the Coordination
Committees in crisis.
3.96. Based on the results of these studies, CEIOPS considers that
some specific issues related to the work of the colleges and the
supervision at group level in a crisis situation should be dealt
within the implementing measures, either at Level 2 or Level 3.
3.6.1 Preparation for crisis management
3.97. In order to ensure preparedness in a crisis situation, the
College of Supervisors should in normal times engage in sharing
and reflecting upon information and assessments relating to issues
of common interest based on Article 253(1) second paragraph and
the Level 2 implementing measures, cf. 3.1.2 above.
3.98. The College of Supervisors should also engage in sharing and
reflecting upon information needed for assessing the systemic
implications of a crisis and for the handling of a cross-sectoral
systemic financial crisis.
The supervisory authorities should be aware of the potential
channels of contagion from the insurance
undertakings of the group to other financial undertakings or to
the real economy and from other financial sectors to the insurance
sector.
3.99. To be fully prepared for any action that may be required,
the College of Supervisors should analyse beforehand any crisis
situation that may arise and any potential conflict of interest.
Furthermore, the College of Supervisors
should agree on a specific emergency plan, including cooperation
and coordination in these kinds of situations.
The emergency plan should be based on the specific risks of the
insurance group.
It may be natural for the College to agree that crisis situations
regarding the insurance group should always involve the top level
of the supervisory authorities.
3.100. The emergency plan could be developed as a part of the
coordination arrangements or as a separate plan with the basis in
the coordination arrangements.
3.101. As stated in paragraph 3.76 above, the coordination
arrangements for the College of Supervisors shall describe the
activities and the role of the supervisory authorities, including
by means of delegation or by sharing some operational activities.
The College of Supervisors should in advance consider whether
there are any specific tasks that could be delegated in a crisis
situation.
3.102. The Crisis MoU prescribes that
the parties will endeavour to conduct, as part of contingency
arrangements for managing crisis situations, simulation exercises,
to enhance the preparedness for handling crisis situations.
Furthermore, the experiences from the current crisis showed
unclear responsibility for the organisation
of the cooperation and meetings among the supervisors were not
organised before the crisis.
To avoid this to happen in the future and enhance the
preparedness, the emergency plan should be tested by the College
of Supervisors.
The College should agree on the extent and the frequency of the
testing of emergency plans and crisis exercises.
3.6.2 Crisis alert and exchange of information
3.103. The supervisory authority who becomes aware of the
emergence of a potentially serious financial disturbance or is
aware of facts or events that may give rise to significant
problems for an insurance group or the functioning of financial
markets, will inform as soon as possible the group supervisor.
The group supervisor or the mentioned supervisory authority should
ensure that information
is shared within the College of Supervisors as soon as
practicable.
3.104. In addition to the ongoing exchange of information within
the College of Supervisors, the following information should be
considered relevant to be exchanged as soon as practicable in a
crisis situation:
• affected entities
• description of the crisis
• the latest financial information about the affected entities
• significance of the affected entity
• impact on the financial market
• systemic assessment results
• any measures or recovery actions taken by the group
• existing national safety net arrangements
3.105. The College of Supervisors should consider whether it is
necessary to inform other relevant authorities or to share the
information within cooperation arrangements established pursuant
to the Crisis MoU.
3.106. Concerning actions to be taken on a cross-border basis the
group supervisor should activate the steps and procedures that
should be established in the emergency plan and in Level 3
guidance developed by CEIOPS.
The activation may be requested by any member of the College.
When the procedures are activated, all supervisory authorities
concerned should be involved at an early stage.
3.6.3 Crisis assessment and crisis management
3.107. After a crisis alert, the group supervisor should as soon
as practicable assess the nature of the financial crisis and its
implications.
The other supervisory authorities should assist the group
supervisor to reach a common understanding within the College of
the nature of the crisis in the cross-border context and perform
its own assessment of the crisis and its implications at a
national level.
The goal of the assessment phase is to assess the systemic
implications and provide a basis for the decision of whether to
intervene, and if so, how to intervene.
3.108. Considering that the assessment is being performed within
the College of Supervisors it should be taken upon the perspective
of the specific implications for the relevant insurance group,
including identification of possible sources of systemic risk and
wider implications for the financial system and the real economy.
The College of Supervisors should especially
pay attention to the potential channels of contagion identified,
including any intra-group transactions observed prior to or during
the crisis situation.
Intra-group transactions in crisis situations are dealt with in
the CEIOPS Advice for Level 2 implementing measures about
Supervision of Risk Concentration and Intra-Group Transactions.
Furthermore, the College of Supervisors should focus on the
liquidity position of the group, with the perspective of the
possibility to rapidly transfer assets to the undertaking in
crisis.
This is further dealt with in the CEIOPS Advice for Level 2
Implementing Measures on Solvency II: Assessment of Group Solvency
3.109. The management and resolution of a cross-border crisis
require close cooperation between the supervisory authorities and
well structured coordination based on procedures and processes
agreed upon in normal times taking into account the tasks and
responsibilities set out in the legal
framework and the Crisis MoU.
It should be taken into account that other authorities, such as
ministries and central banks and their cooperation arrangements
may take part in and be responsible for the crisis management and
resolution.
3.110. In a crisis situation in an insurance group, the group
supervisor will coordinate the supervisory activities, as stated
in article 252(1)(e), and will in close cooperation with the other
supervisory authorities, coordinate the management of the
situation.
In case of a cross-border systemic financial crisis, the situation
may require the management and resolution at the ministries level
in several countries, and the supervisory authorities should be
expected to be involved as technical experts by the relevant
ministries.
The supervisory authorities may be expected to gather and update
data that could be used as a basis for possible public
interventions and assess the possibilities to use various tools
3.111. Based on the crisis assessment, the College of Supervisors
should analyse the need, scope and conditions for any supervisory
actions to be taken towards the insurance group or any of its
undertakings.
3.6.4 External communication
3.112. The group supervisor is in charge of coordinating the
public communication at each stage of a crisis. It should ensure
that the communication (or non communication) of the supervisory
authorities take into consideration the communication of the
insurance group to the public.
In such situations, the insurance group will normally be obliged
to disclose information according to article 53.
3.113. Communication towards the public should, to the maximum
extent possible, be handled in a coordinated fashion at all stages
of the crisis.
The supervisory authorities should prepare joint public
statements, even in cases where only one
supervisor has to make such a statement, if the interests of the
others may be at stake.
CEIOPS’ advice
3.114. The coordination and cooperation within the College of
Supervisors should be developed in coordination arrangements to
enhance the preparedness in normal times and deal with the
different natures and stages of a crisis.
3.115. To be fully prepared for any actions that may be required
and taking into account the role played in crisis management by
central banks and of Ministries of finance and communication to
the public, the College of Supervisors should agree on a specific
emergency plan based on the specific risks of the insurance group,
as part of or based on the coordination arrangements.
The emergency plan should include provisions on the preparation
for crisis management, crisis alert,
crisis assessment, crisis management and external communication.
The emergency plan should be tested in the extent and with the
frequency agreed by the College of Supervisors.
3.116. The College of Supervisors should engage in sharing and
reflecting upon information needed for assessing the implications
of a crisis and the handling of a cross-border financial crisis.
3.117. In addition to the ongoing exchange of information within
the College of Supervisors, the following information should be
considered relevant to be exchanged as soon as practicable in a
crisis situation:
• affected entities
• description of the crisis
• the latest financial information about the affected entities
• significance of the affected entity
• impact on the financial market
• systemic assessment results
• any measures or recovery actions taken by the group
• existing national safety net arrangements.
3.7. Further Level 3 guidance
3.118. CEIOPS will develop Level 3 guidance to encourage more
convergence and ensure an adequate level of harmonisation. The
guidance may cover the following issues:
• The procedures for the assessments and
reviews foreseen in Level 1 text;
• The other tasks, measures and decisions assigned to the group
supervisor by the Directive or deriving from it application;
• The coordination arrangements in accordance with article 252 (4)
and (5);
• Further practical organizational issues, including delegation of
tasks (e.g. types of tasks that can be or not be delegated,
extent, terms and conditions) if not specifically addressed within
the 3L3 work on delegation of tasks;
• Criteria for the inclusion of participants within the
specialized supervisory teams (e.g. the significance of
undertakings within the group and/or in their local markets);
• The preparation, assessment and management of a financial
crisis.
The Level 3 guidance may take into consideration the Crisis MoU
and the Guidelines on preparation for and management of a
financial crisis of 26 March 2009 to the extent these are
applicable within the Framework Directive Proposal;
• The external communication, especially in crisis situation.
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
  
|
