This paper focuses on the objectives and operating rules of colleges of supervisors at the global and European levels. In particular, the paper aims to illustrate why close cooperation among supervisors of cross-border (re)insurance groups is essential to make their supervision more efficient and effective, thereby contributing to the protection of policyholders and beneficiaries and the stability of the financial system.
The paper aims to illustrate how colleges of supervisors have evolved over time and what tasks are currently assigned to them under the IAIS framework – particularly with regard to Internationally Active Insurance Groups (IAIGs) – and under the Solvency II framework. The paper also outlines the importance of coordination arrangements that govern the functioning of colleges of supervisors and provide the basis for multilateral information exchange and cooperation as well as the annual work plan that identifies the main lines of action to be implemented for each college, taking into account its risk profile and complexity.
Il presente articolo si concentra sugli obiettivi e le regole di funzionamento dei collegi dei supervisori a livello globale ed europeo. In particolare, il documento intende illustrare perché la stretta cooperazione tra le autorità di vigilanza dei gruppi (ri)assicurativi transfrontalieri sia essenziale per rendere la loro vigilanza più efficiente ed efficace, contribuendo così alla protezione degli assicurati e dei beneficiari e alla stabilità del sistema finanziario.
Si intende illustrare come i collegi dei supervisori si sono evoluti nel tempo e quali compiti sono loro attualmente assegnati nel framework IAIS – in particolare per quanto riguarda gli Internationally Active Insurance Groups (IAIGs) – e nel framework Solvency II. Il documento sottolinea inoltre l’importanza degli accordi di coordinamento che regolano il funzionamento dei collegi dei supervisori e forniscono la base per lo scambio multilaterale di informazioni e la cooperazione, nonché del piano di lavoro annuale che individua le principali linee di azione da attuare per ciascun collegio, tenendo conto del suo profilo di rischio e della sua complessità.
1. The colleges of supervisors according to the IAIS and the Solvency II framework: an overview - 1.1. IAIS framework - 1.2. Solvency II framework - 1.3. The historical development of colleges of supervisors within the European Union - 2. Colleges of supervisors: what they are - 2.1. As a permanent structure for cooperation - 2.2. As a flexible and proportionate structure for cooperation - 3. The key objectives of colleges of supervisors - 4. Membership of colleges of supervisors - 5. The role of the group supervisor - 6. The role of the other involved supervisory authorities - 6.1. The role of the EEA supervisory authorities of subsidiaries - 6.2. The role of EIOPA - 6.3. The role of supervisors of significant branches and related undertakings - 7. The coordination arrangement - 7.1. The emergency plan - 7.2. The confidentiality rules for the exchange of information - 7.3. The annual work plan - 8. Final remarks - NOTE
In the insurance market, activities are largely carried out on a cross-border basis, in most cases, by (re)insurance groups operating in different markets through subsidiaries and branches. Effective supervision of (re)insurance groups active in multiple countries requires close and continuous coordination among the authorities involved both as supervisor of the parent company [1] and as supervisor responsible for the supervision of subsidiaries or the branches [2]. There are many reasons for this, but they can be summarized as the need for both the group and host supervisors to have a comprehensive view of the risks and vulnerabilities of the group as a whole and of each of its member entities as well as of the benefits that can derive from diversifying its activity into different lines of business and different geographic areas [3]. Colleges of supervisors are the main collaborative mechanism for promoting more effective supervision of cross-border (re)insurance groups, thereby contributing to the protection of policyholders and beneficiaries and the stability of the financial system as a whole. As will be analysed in the following paragraphs, over the years – through a continuous process of improving and monitoring their work – they have proven to be an effective mechanism for multilateral cooperation among supervisors that facilitates balancing the level and amount of information available to them. With their establishment, the supervisors establish a series of relationships, which include regular meetings, physical or otherwise, but generally any contact in the form of teleconferences, videoconferences, letters, e-mails or website communications that allow for the timely sharing of all relevant information. Recent problems arising from the Covid-19 pandemic demonstrated that, even in a crisis situation, there was an adequate flow of information between the authorities of the colleges that facilitated the coordination of measures and actions taken in the respective national markets. The analyses conducted in this paper will focus on the insurance industry [4] and the following sections will explore the IAIS and Solvency II frameworks that, respectively, govern the establishment and operation of supervisory colleges [5] worldwide and in the European Economic Area (EEA). The purposes underlying the establishment of supervisor colleges and the criteria governing their operation are overall the same in the IAIS [continua ..]
At the global level, the basis for functioning of colleges of supervisors can be found in the IAIS Insurance Core Principles (ICPs) [8], in the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) [9], in the Application Paper on Supervisory Colleges and in the Implementation Guide on Supervisory Colleges. According to the IAIS Glossary, a supervisory college is a “type of coordination arrangement to foster cooperation and coordination between involved supervisors with regard to the supervision of an insurance group, as well as to promote common understanding, communication and information exchange” [10]. The definition is deliberately broad and general because it should allow for the possible different forms of cooperation between supervisors to be included in it. Additional elements that clarify its content and define the tasks and purposes of colleges of supervisors can be found in the ICPs and – with specific reference to the Internationally Active Insurance Groups (IAIGs) – in the ComFrame. IAIGs are insurance groups that operate and write premiums in multiple national jurisdictions while also meeting other size requirements [11]. More specifically, the rules for the operation and purpose of the colleges of supervisors are in ICP 3 (Information Sharing and Confidentiality Requirements) and ICP 25 (Supervisory Cooperation and Coordination), but the breadth of information and tasks assigned to them can be inferred from the overall reading of the ICPs. Suffice it to mention, ComFrame 9.7. [12] which stipulates that the group-wide supervisor shall communicate the results of the group-wide supervisory review of the IAIG, including the group-wide risk assessment, to the supervisory college and, as appropriate, to the Head of the IAIG [13]; ComFrame 10.0.b.1 [14] which states that the supervisory college shall provide a forum for the group-level supervisor and other supervisors involved to coordinate preventive and corrective measures. In November 2021, the IAIS published an Application Paper describing the processes and practices related to the establishment and operation of supervisory with the aim of furthering understanding of the work of supervisory colleges and explaining the role and involvement that insurers can have in them. The Application Paper, as a publicly available document, focuses on those aspects of the operations of supervisory colleges [continua ..]
At European level, the bases for functioning of colleges of supervisors are in the Solvency II directive [18] (hereinafter also the “Directive”), applicable as of January 1, 2016. There is a specific Title – Title III – that deals with the group supervision, including aspects related to the organization and functioning of the colleges of supervisors for the supervision of (re)insurance cross-border groups. According to the Directive “Colleges of supervisors are permanent but flexible structure for the cooperation, coordination and facilitation of decision making concerning the supervision of a group” [19]. Unlike the IAIS, the Directive requires supervisors to establish a college for all cross-border (re)insurance groups, regardless of their size and complexity, provided there is at least one subsidiary in an EEA country other than the home country. In any case, the application of the proportionality principle is also relevant at the European level, as will be analyzed in detail below. The provisions of the Directive are complemented and, in some cases, clarified by the Delegated Regulation of the European Commission [20] (hereinafter the “Delegated Regulation”) that are mandatory for all the European [21] Member States. In particular, the Delegated Regulation regulates the basic elements of cooperation within the colleges, such as the conclusion of coordination agreements, minimum frequency of meetings, preparation of annual work plans and exchange of information. With the same objective, Implementing Technical Standard (EU) 2015/2014 [22] expands the provisions on information exchange by describing procedures and templates for information submission. In addition to that, EIOPA [23] released, in 2015, the “Guidelines on operational functioning of colleges” [24] (hereinafter the “Guidelines”) with the specific objective to provide common rules for the functioning of colleges across Member States and the “Guidelines on the exchange of information within colleges” aimed at facilitating activities of colleges in the field of exchange of information on a systematic basis [25]. The activity of colleges of supervisors established in the case of cross-border groups that qualify as financial conglomerates is also operationally regulated by the ESA Joint Guidelines on the convergence of supervisory practices relating to the [continua ..]
As mentioned above, the importance of colleges has been recognized and reinforced by the Solvency II directive, which, included a requirement to establish colleges of supervisors, thus recognizing that they are the main instrument for supervisory cooperation and coordination of supervisory activities in the context of the supervision of cross-border (re)insurance groups. The Directive itself also makes explicit reference to the need for supervisors to exchange information and share their assessments within colleges, with reference to all major aspects of group supervision. However, colleges of supervisors are not an entirely new form of cooperation since Solvency II built on the forms of cooperation for the supervision of (re)insurance groups already established under the previous Solvency I regime. It therefore seems useful to indicate, albeit briefly, the main stages that had characterized their establishment and evolution. The first supervisory colleges were established in 2000, following the signature of the “Helsinki Protocol” for the group supervision, that is the Collaboration Protocol between the supervisory authorities in the European Union, with regard to the application of Directive 98/78/EC on the supplementary supervision of insurance undertakings in an insurance group [34]. They were called Coordination Committees “CoCos” and were the precursors to today’s colleges of supervisors, although they were more informal and were established only for some of the largest insurance groups. To assist in developing a consistent and effective college framework, the EIOPA’s predecessor, CEIOPS (Committee of European Insurance and Occupational Pensions Supervisors), published guidelines for “Coordination Committees in the Context of Supplementary Supervision as defined by the Insurance Groups Directive 98/78/EC” with the purpose to ensure consistency regarding supplementary supervision as well as increasing the level of efficiency and effectiveness of the work of the Co-Cos [35]. In addition, CEIOPS, together with the Committee of European Banking Supervisors (CEBS) [36], and the Interim Working Committee on Financial Conglomerates (IWCFC) [37] published, in 2009, 10 Common Principles for the colleges of supervisors with the aim of also fostering cross-sector convergence in the supervision of cross-border groups [38]. Over the years, the functioning of the colleges has been [continua ..]
In order to define what supervisory colleges are and why they are an integral part of the group-wide supervisory process, it is also necessary to clearly identify what they are not. Therefore, starting from the global and European framework, an attempt will be made to enucleate the main aspects that define and characterize them, specifying the limits within which they operate.
First, a college is a permanent structure, which means it is a formal permanent forum for supervisors to build relationships and create greater cohesion in mutual cooperation and coordination of supervisory activities in relation to the (re)insurance group and entities within the group, both on an ongoing basis and in crisis management situations. It is therefore a forum, a platform and does not have its own legal personality. At the global level, the IAIS clearly states that the college of supervisors is not a decision-making body, but its purpose is to facilitate consensus building among supervisors. Cooperation within it must always take into account the local legal systems applicable to the participating authorities. In other words, supervisory cooperation and coordination does not imply joint decision-making or delegation of the responsibilities of a single supervisor, and a supervisory college as such cannot impose requirements on the group or its entities or take actions designed to produce legal effects with respect to the group or its entities. This is also generally true at the European level, but with three exceptions as supervisory colleges have, under Solvency II rules, a decision-making role in: 1. the approval of applications to use an internal model at group and subsidiary levels; 2. the approval of applications to make a subsidiary subject to a centralized risk management; 3. the identification of the group supervisor on a different basis from the criteria set out in Directive itself. The first one is an important exception, considering that most of the major European groups are cross-border groups and apply an internal model for calculating their group SCR. This implies that the decision-making process of the authorities involved in the approval must come to an agreement within set timeframes and according to clear and coordinated procedures. In this regard, the Commission has also intervened with a specific Implementing Regulation, as such mandatory for all EEA members, which sets technical implementing rules regarding the process for reaching a joint decision on the request to use a group internal model [40]. The second is currently more theoretical than practical, as the groups so far have not applied the centralized risk management regime [41]. The third one as well can assume a practical relevance in particular when the parent of the insurance group is an insurance holding company or a mixed financial holding [continua ..]
The colleges of supervisors should also be flexible in terms of structural composition, form, membership and operations. These aspects can vary, even significantly, depending on the nature, size and complexity of the group and even the jurisdictions in which it operates [42]. In practice, some colleges consist of only two authorities, while others include 20 or more authorities from all parts of the world. In addition, in the most complex colleges, specialized working groups are in some cases established on a permanent basis or for the implementation of specific projects. The activities of the colleges are guided by the principle of proportionality, which means that cooperation in this context must also be proportionate and risk-based. It applies both at the IAIS and Solvency II framework level and implies the possibility for supervisors to modulate the manner and frequency of cooperation according to the specificity of the group on a case-by-case approach. More specifically, the IAIS Introduction to ICP states that: “Supervisors have the flexibility to tailor their implementation of supervisory requirements and their application of insurance supervision to achieve the outcomes stipulated in the Principle Statements and Standards”. In the Solvency II framework, Recital 114 of the Directive makes it clear that “the activities of the College should be proportionate to the nature, scale and complexity of the risks inherent in the business of all undertakings that are part of the group and to the cross-border dimension”. Therefore, it is the Directive itself that, on the one hand, establishes a harmonized and detailed framework of rules for cooperation within colleges of supervisors and, on the other hand, provides a legal basis for their application that takes into account concrete coordination needs and is not unduly burdensome in terms of resources and efforts for supervisors.
The main objective of efficient and effective operation of supervisory colleges is to enable supervisors to assess and take measures to protect the interests of policyholders and beneficiaries in their respective member States. The college provides a platform for strong cooperation and coordination among the authorities involved in group supervision that facilitates a common understanding of the group as a whole and its risk profile, while reducing possible gaps in supervision and unnecessary duplication of supervision. The proper joint risk assessment of the groups, that is the assessment of all risks to which the group is exposed, arising from all group entities, regardless of their nature, whether regulated or not, and their location, is one of the most important parts of the work of colleges of supervisors and the basis for the proper determination of group solvency [43]. It combines a top down approach, that is, the group supervisor’s assessment of the group as a whole, and a bottom up approach derived from the supervisors of individual group entities. Proper risk assessment, implies that when one of the supervisors has relevant information, it must share it with the other supervisors in a timely manner so that all supervisors have the same information [44]. The assessment of the group as a whole and its entities makes it necessary to evaluate several other aspects, all of which are interrelated, such as: the assessment of intra-group transactions and risk concentration, the financial position and adequacy of regulatory capital, compliance with supervisory requirements, and the governance system adopted. In recent years, it has become increasingly important for colleges to discuss and evaluate the Insurance Capital Standard (ICS), i.e. the global solvency standard developed by the IAIS with the purpose of creating a common language for supervisory discussions on group solvency of IAIGs and improving global convergence among group capital standards [45]. The ICS was approved in November 2019 for a five-year monitoring period for confidential reporting and discussion in supervisory colleges from the beginning of 2020. Following the end of the monitoring period, the ICS will be implemented as a group-wide prescribed capital requirement. The colleges have an essential task during this monitoring period to promote a full understanding of the ICS and to facilitate comparisons with other group solvency assessment systems, such as [continua ..]
In both the IAIS and Solvency II frameworks, the approach followed in identifying members and participants in colleges of supervisors is an inclusive approach, in the sense that it aims to include all supervisors of entities that are relevant – even if at different levels – to the assessment of the risk profile of the group as a whole. This approach is consistent with the holistic approach of group supervision. This does not mean, however, that all supervisors have the same role and responsibilities. In fact, they are different and result from the inherent characteristics of consolidated supervision from a cross-border perspective. In both the IAIS and Solvency II contexts, consolidated group supervision is clearly positioned on home country supervision. On this basis, there is a single authority responsible for group supervision, namely the group supervisor, and it is from this cornerstone that the relationship between group supervisors and individual entity supervisors is defined. According to the IAIS framework a supervisory college is typically composed of representatives of each of the supervisors responsible for the day-to-day supervision of the insurance legal entities, including material or relevant branches, which are part of the group and, as appropriate, any supervisors of other material non-insurance entities. The IAIS leaves it to the coordination agreements (see Section 7 below) to clearly establish the criteria for membership in the supervisory college and indicates multiple factors, mainly quantitative but also qualitative, that supervisors should consider. These include, to name a few: – the relative size and materiality of the insurance legal entity relative to the insurance group as a whole; – the relative size or materiality of the insurance legal entity relative to its local market; – the level of risk in a particular insurance legal entity; – the proportional contribution of an insurance legal entity to the group Solvency Capital Requirement and/or to the group own funds; – the role of an insurance legal entity within the group’s organisational structure, systems, and controls. Under Solvency II, the Directive, the Delegated Regulations and the Guidelines clearly define the criteria for the identification of all supervisors involved in the activities of the colleges and identify their roles and responsibilities, making a substantial difference between members and participants. [continua ..]
In both the IAIS and Solvency II frameworks, the group supervisor (referred to as group-wide supervisor in the IAIS context) is called upon to play a leadership role, with reference to all phases of the college. Indeed, it is the supervisor responsible for coordinating and exercising group-wide supervision and in that capacity also chairs the college of supervisor. The group supervisor strives to ensure effective cooperation within the supervisory college, including the exchange of information on a regular basis; monitors and assesses the legal and management structure, solvency and risk situation, particularly intra-group transactions, as well as compliance with the group’s corporate governance requirements; regularly informs the members of the college and ensures that the college has operational mechanisms for smooth operation, including any updates to the college structure and proper planning of activities. In addition, the group supervisor ensures communication of relevant issues with group management and serves as a point of contact for group-wide information gathering for the purposes of the supervisory college. In terms of its identification, in general, the group supervisor is the supervisor who authorized the parent company, if it is a (re)insurance company [50]. Under the Solvency II framework, the rights and duties assigned to the group supervisor are set out in detail in Article 248 of the Directive. They are very wide and cover all areas of group supervision, such as: (a) coordination of the gathering and dissemination of relevant or essential information for going concern and emergency situations, including the dissemination of information which is of importance for the supervisory task of a supervisory authority; (b) supervisory review and assessment of the financial situation of the group; (c) assessment of compliance of the group with the rules on solvency and of risk concentration and intra-group transactions; (d) assessment of the system of governance of the group; (e) planning and coordination, through regular meetings held at least annually or through other appropriate means, of supervisory activities in going-concern as well as in emergency situations, in cooperation with the supervisory authorities concerned and taking into account the nature, scale and complexity of the risks inherent in the business of all undertakings that are part of the group.
The work and effectiveness of a college depends on the contribution of all supervisors involved in group supervision, not just the group supervisor. The IAIS refers to the supervisors other than the group supervisor as the “other involved supervisors” and specifies their responsibilities and duties. According to ICP 25, all other involved supervisor should understand: – the structure and operations of the group insofar as it concerns the insurance legal entities in its jurisdiction; and – the way that operations of insurance legal entities of the group in its jurisdiction may affect the rest of the group. Other involved supervisors are required to provide input suitable for facilitating the coordination of activities by making available knowledge of the supervised enterprise and its management, as well as highlighting any specificities of the supervisory approach adopted in the national context and the underlying rationale. Under Solvency II, the role and position of the supervisors involved in group supervision is pointedly stated, as will be described below.
The host supervisors of EEA subsidiaries of the re(insurance) cross-border groups are members of the colleges. They contribute significantly to the overall supervisory process of a group, as it can provide in-depth knowledge of the local insurance market that is not available to the group supervisor. This ability to understand and assess the local risks of subsidiaries and branches is essential for assessing the risk profile of the group as a whole and its capital adequacy. The host supervisor shall provide to the group supervisor – in addition to the information subject to systematic exchange agreed within the college [51] – any other relevant information in accordance with the ad hoc information exchange procedure, including information on supervisory actions and measures taken or intended to be taken, together with the main findings and conclusions of such actions. Host supervisors are also required to inform the group supervisor of their intention to apply the capital add-on at the level of the supervised subsidiary or, where relevant to group supervision, to conduct an inspection at the subsidiary, and may also propose to the group supervisor to conduct a joint inspection. Each member expresses its opinion on issues and procedures that require a joint decision or agreement and votes when requested. In this regard, it should be emphasized that the right to vote rests solely with the group supervisor and the host supervisor of subsidiaries in the EEA.
EIOPA is a member of all colleges of supervisors and in that role participates in their activities, including joint on-site inspections, carried out jointly by two or more competent authorities. Its level of engagement is reviewed annually based on criteria that include the economic/systemic importance of each group and its solo entities, the complexity and functioning of the college, the financial strength of the group, the level of its cross-border activities, and its risk profile. Through direct participation in the colleges of supervisors, EIOPA also plays a coordinating role. EIOPA’s role and tasks go beyond its direct participation in colleges of supervisors, as one of its main objectives is to strengthen the supervision of cross-border groups. More specifically, EIOPA’s powers consist of: – collecting and sharing all relevant information in cooperation with the competent authorities in order to facilitate the work of the college and establishing and managing a central system to make such information accessible to the competent authorities in the college; – initiating and coordinating Union-wide stress tests to assess the resilience of financial institutions, in particular the systemic risk posed by financial institutions; – promoting effective and efficient supervisory activities, including evaluating the risks to which financial institutions are or might be exposed as determined under the supervisory review process or in stress situations; – overseeing the tasks carried out by the competent authorities in the college; – requesting further deliberations of a college in any cases where it considers that a decision would result in an incorrect application of Union law or would not contribute to the objective of convergence of supervisory practices; – requiring the consolidating supervisor to schedule a meeting of the college or add a point to the agenda of a meeting; – playing a legally binding mediation role to resolve disputes between competent authorities in the college [52]; – setting binding technical standards in the area covered by the college. In addition, EIOPA maintains a list of all insurance groups in the EEA and their subsidiaries and branches in the EEA and third countries, with contact details of the supervisors involved in group supervision and basic supervisory information (so-called Helsinki plus list) [53].
Supervisory authorities of: – EEA supervisory authorities of significant branches; – EEA supervisory authorities of related undertakings other than subsidiaries [54]; – non-EEA supervisory authorities of related undertakings including subsidiaries; – authorities responsible for the supervision of credit institutions and investment firms that are part of the group, can participate in the colleges of supervisors if certain conditions are met. More specifically, on its own initiative or following a reasoned request from the supervisory authority responsible for the supervision of a branch, where the branch [55] is “significant”, the group supervisor may invite the supervisor to participate in any relevant activity of the college of supervisors if this contributes to enhancing the efficient exchange of information and facilitating the exercise of group supervision. Art. 355 of Delegated Regulation specifies that ‘significant branch’ of an insurance or reinsurance undertaking means a branch of an insurance or reinsurance undertaking for which at least one of the following conditions is met: – the annual gross written premium of the branch exceeds 5 % of the annual gross written premium of the group, measured with reference to the last available consolidated financial statements of the group; – the annual gross written premium of the branch exceeds 5% of total annual gross written premiums for the life activity, the non-life activity, or both in the Member State in which the risk is situated, measured with reference to the last available financial statements. Similarly, again on its own initiative or following a reasoned request from a supervisory authority responsible for the supervision of a related undertaking in the group, the group supervisor may, if it considers it appropriate to enhance the efficient exchange of information and facilitate the exercise of group supervision, and after consultation with the other supervisors in the college of supervisors, invite the third-country supervisory authorities [56] and the supervisory authorities of other financial sectors to participate in any relevant activity of the college of supervisors. It is, however, in all cases, a participation that shall be limited to achieving the objective of an efficient exchange of information and does not give the right to vote.
The establishment and functioning of a supervisory college is based on coordination arrangements concluded by the group supervisor and the other involved supervisory authorities that protect confidentiality and provide for supervisory coordination and cooperation in both going concern and emergency or crisis situations. Coordination agreements are multilateral cooperation instruments that regulate relations among all authorities involved in the supervision of cross-border groups and are a more efficient tool than several possible bilateral agreements, particularly for larger groups involving many supervisors. In the IAIS context they are referred to as coordination agreements, and it is recognized that in practice supervisors may use different terms to describe them, for example: memorandum of understanding, terms of reference but what is decisive in determining whether it should be considered as a coordination agreement is the content that should cover activities including: – information flows between involved supervisors; – communication with the head of the group; – convening periodic meetings of involved supervisors; – the conduct of a comprehensive assessment of the group, including the objectives and process used for such an assessment; and – supervisory cooperation during a crisis [57]. The coordination arrangement is not legally binding and does not create enforceable obligations from one supervisor to another. However, the IAIS recognizes that jurisdictions may be under an obligation to establish such an agreement [58]. This is the case in the Solvency II context, as it is the Directive itself that stipulates that the establishment of the colleges of supervisors and their operation are based on coordination agreements concluded between the group supervisor and the host supervisors. It is noteworthy that, even in the context of Solvency II, they do not create additional legally binding obligations for members and participants that are not provided for in the Directive or the Delegated Regulation. In addition to the provisions of the Directive, the Delegated Regulation specifies that coordination arrangements must be in writing and must contain at least the following elements: – the minimum information to be transmitted to the group supervisor by the other supervisory authorities and vice versa; – the language and frequency of the information; – the obligation to adopt a work [continua ..]
The same Article in the Delegated Regulation also specifies the content of the emergency plan, which must in all cases include provisions covering the following elements: recognition of the existence of a crisis; preparation of the crisis management; crisis assessment; crisis management; and external communication. The purpose of the emergency plan is to support the management of an emerging crisis by the group supervisor and the college of supervisors. When dealing with an emergency situation, college members, under the coordination of the group supervisor, should aim to develop a coordinated supervisory assessment of the situation, agree on a coordinated supervisory response and monitor the implementation of their response, to ensure that the emergency situation is properly assessed and addressed. They should also ensure that any external communication is done in a coordinated way and covers elements which are agreed ex-ante between the members of the college. In particular, it aims to: – facilitate the exchange of confidential information on short notice within the college; – create transparency regarding the structure of the group; and – ensure early warning in the event of a crisis in order to maximize time for coordination and cooperation; – ensure effective and efficient information within the college and to the public. In addition, the timely and confidential management of information flows between members and participants or with the group is based on an up-to-date contact list and predefined secure communication channels.
All information exchanged and activities conducted within the colleges of supervisors must be conducted under confidentiality rules. This implies that supervisors agree that any confidential information shared between them will be used only for lawful supervisory purposes related to the supervision of the group and is subject to the obligation of professional secrecy. According to IAIS ICP 5, supervisors are required to cooperate and share information with other relevant supervisors in compliance with confidentiality requirements; information provided by a supervisor remains confidential to the receiving supervisor and is to be used only for supervisory purposes. Participation in the colleges requires the supervisor to be a signatory to the IAIS Multilateral Memorandum of Understanding on Cooperation and Exchange of Information, as a necessary condition for membership in the MMoU is that its jurisdiction ensure confidentiality rules appropriate to the standards set by the IAIS. Under Solvency II, the home country of the supervisor is of paramount importance. All EEA authorities are required to comply with the confidentiality rules set forth in the Directive itself, so there is a strict and harmonized system of rules that safeguards their handling of information in colleges. For non-EEA countries, the confidentiality rules are those established by their respective jurisdictions, consequently a necessary condition for an EEA group supervisor to invite a supervisor from a third country to join the college is that the legal provisions of its country are considered by all members and participants of the college to be adequate to ensure the confidential treatment of information exchanged within the college [62]. First, relevant to this assessment is whether these provisions have been deemed equivalent to those of the European Union by the European Commission [63]. It also notes whether they are signatories to the IAIS MMoU. It is worth mentioning, because of its specificity due to Brexit, that as of January 1, 2021, cooperation and information exchange between EEA supervisors and EIOPA with UK supervisors is regulated by two Memoranda of Understanding signed in March 2019: – a bilateral one signed by EIOPA with the Prudential Regulation Authority “PRA” and the Financial Conduct Authority “FCA” (for UK); – a multilateral one signed by all National Competent Authorities “NCAs” in the European [continua ..]
In both the IAIS and Solvency II frameworks, it is emphasized that, like any supervisory activity, the work of the colleges of supervisors must be properly and timely planned. The group supervisor, with the coordination of the college’s other supervisors, establishes what is generally referred to as a work plan, that is, the planning of the college’s cycle of activities, the members responsible for and involved in carrying them out as well as the date of completion. The work plan reflects the nature and risk profile of the (re)insurance group and may be more or less complex and detailed. It is a cyclical activity, which must necessarily build on previous activities and their results, not least because many activities, by their very nature, cannot be completed in a single year, but require longer time frames. More specifically, a work plan should include: – a description of the main risks to which the group is exposed, based on the results of the group’s risk assessment framework; – a description and rationale for the activities that the college will carry out based on the group supervision plan; – the identification of the relevant entities within the group and the respective supervisors from whom the group supervisor may seek input. The work plan should cover at least a 12-month period and be updated at least annually or as circumstances warrant [65]. Under Solvency II, it is clearly stated that the coordination agreement must include an annual work plan for the “coordination of the college’s supervisory activities over the following 12 months” [66]. Beginning in 2013 and continuing through 2016, the work plan actions were defined by the supervisors within EIOPA with the purpose of ensuring the harmonization of activities carried out by colleges in the early stages of their establishment and start-up. EIOPA then monitored their progress and disclosed the results in annual reports, published in aggregate form [67]. As of 2017, it was deemed appropriate to leave it to each college to identify the actions to be included in the work plan to allow for better consideration of the specificities of the supervised groups. EIOPA, as a member of all colleges, actively participates in the definition of the work plans, which ensures a certain degree of harmonization of the activities carried out while taking into account the specificities of each group. EIOPA also continues to monitor their [continua ..]
The insurance industry is largely characterized by the presence of large (re)insurance groups operating in several countries. Effective and efficient supervision of them requires close cooperation among the supervisory authorities involved in their supervision. This meets not only to microprudential objectives with the ultimate purpose of adequate protection of policyholders and beneficiaries, but also to macroprudential supervisory purposes for the stability of the insurance and financial system as a whole. Colleges of supervisors are the main and well-established form of cooperation for the supervision of cross-border (re)insurance groups. There is a highly developed institutional and regulatory architecture governing their functioning and purpose, particularly at the global level for IAIGs and at the European level under Solvency II. Over time, the colleges of supervisors have seen improvements, thanks to the continuous learning-by-doing process of all supervisors involved, both as group and host supervisors, the monitoring and proactive role of the IAIS and EIOPA, and the input of the insurance groups themselves. This is also confirmed by the fact that the proposal for the revision of the Solvency II directive, currently being discussed by the European institutions, does not contain any provisions that directly change the rules governing their establishment, operation and assigned tasks. However, colleges of supervisors operate in an evolving regulatory framework, both in the IAIS and European contexts, and are not the only platform for supervisors to cooperate on cross-border issues. This has an impact on their functioning and purpose, and it is evident that there is an increasing need to strengthen synergies and points of contact between the various cooperation platforms, as well as with supervisors from other financial sectors involved in the supervision of cross-border financial conglomerates, in order to avoid duplication or gaps in supervision. The challenge for the colleges of supervisors is to continue to be an effective cooperation structure that can promote a thorough and comprehensive assessment of the strengths, risks and vulnerabilities of cross-border re(insurance) groups, even in the face of risks that are becoming increasingly relevant to the insurance market, such as climate change risks and new environmental risks. The colleges of supervisors have some key strengths to be able to adequately address these challenges: first, [continua ..]