EIOPA-CP-14/ April 2014

Transcription

1 EIOPA-CP-14/007 1 April 2014 Cnsultatin Paper n the prpsal fr Implementing Technical Standards On the prcedures t be fllwed fr the apprval f the applicatin f a matching adjustment EIOPA WesthafenTwer Westhafenplatz Frankfurt Germany Phne: Fax: inf@eipa.eurpa.eu EIOPA 2011

2 Table f Cntents 1. Respnding t this paper Cnsultatin Paper Overview & Next Steps Draft Technical Standard... 5 Annex I: Impact Assessment /29 EIOPA 2014

3 1. Respnding t this paper EIOPA welcmes cmments n the Implementing Technical Standards n the prcedures t be fllwed fr the apprval f the applicatin f a matching adjustment. The cnsultatin package includes: The Cnsultatin Paper Template fr cmments Please send yur cmments t EIOPA in the prvided Template fr Cmments, by CP @eipa.eurpa.eu, by 30 June Cntributins nt prvided in the template fr cmments, r sent t a different address, r after the deadline will nt be prcessed. EIOPA invites cmments n any aspect f this paper. Cmments are mst helpful if they: cntain a clear ratinale; and describe any alternatives EIOPA shuld cnsider. Publicatin f respnses All cntributins received will be published fllwing the clse f the cnsultatin, unless yu request therwise in the respective field in the template fr cmments. A standard cnfidentiality statement in an message will nt be treated as a request fr nn-disclsure. A cnfidential respnse may be requested frm us in accrdance with EIOPA s rules n public access t dcuments 1. We may cnsult yu if we receive such a request. Any decisin we make nt t disclse the respnse is reviewable by EIOPA s Bard f Appeal and the Eurpean Ombudsman. Data prtectin Infrmatin n data prtectin can be fund at under the heading Legal ntice. 1 Public access t dcuments 3/29 EIOPA 2014

4 2. Cnsultatin Paper Overview & Next Steps EIOPA carries ut cnsultatins in the case f drafting Implementing Technical Standards in accrdance t Article15 f the EIOPA Regulatin. This Cnsultatin Paper is being issued n the prcedures t be fllwed fr the apprval f the applicatin f a matching adjustment. This Cnsultatin Paper presents the draft Implementing Technical Standard. The analysis f the expected impact frm the prpsed plicy is cvered under the Annex I Impact Assessment. Next steps EIOPA will cnsider the feedback received and expects t publish a final reprt n the cnsultatin and t submit the Implementing Technical Standards fr endrsement by the Eurpean Cmmissin by 31 Octber /29 EIOPA 2014

5 3. Draft Technical Standard 5/29 EIOPA 2014

6 EUROPEAN COMMISSION Brussels, XXX [ ](2011) XXX draft COMMISSION IMPLEMENTING REGULATION (EU) N /.. f [ ] 6/29 EIOPA 2014

7 COMMISSION IMPLEMENTING REGULATION (EU) N.../.. f [date] laying dwn implementing technical standards with regard t the prcedures t be fllwed fr the supervisry apprval f the applicatin f a matching adjustment accrding t Article 77b(1) f Directive 2009/138/EC f the Eurpean Parliament and f the Cuncil f XXX THE EUROPEAN COMMISSION, Having regard t the Treaty n the Functining f the Eurpean Unin, Having regard t Directive 2009/138/EC f 25 Nvember 2009 f the Eurpean Parliament and f the Cuncil n the taking-up and pursuit f the business f Insurance and Reinsurance (Slvency II) 2 and in particular Article 86 theref. Whereas: (1) Article 77b f Directive 2009/138/EC allws insurance and reinsurance undertakings t apply a matching adjustment t the relevant risk-free interest rate term structure, subject t prir apprval by the supervisry authrities where the relevant cnditins are met. (2) The present Regulatin establishes the prcedures t be fllwed fr the apprval f the applicatin f a matching adjustment. (3) In rder fr an applicatin t be cnsidered cmplete, it shuld include all relevant infrmatin necessary fr an assessment and decisin by the supervisry authrity. T prvide a harmnised basis fr assessment and decisin by supervisry authrities, an applicatin shuld include evidence demnstrating that each f the cnditins set ut in Article 77b f Directive 2009/138/EC are met, as set ut in Articles 3 t 6 f this Regulatin. (4) The prcedures t be fllwed envisage nging cmmunicatin between the supervisry authrities and insurance and reinsurance undertakings. This includes cmmunicatin befre a frmal applicatin is submitted t the supervisry authrities and, after an applicatin has been apprved, thrugh the supervisry review prcess. Such nging cmmunicatin is necessary t ensure that supervisry judgements are based n relevant and up-t-date infrmatin and evidence. (5) T ensure a smth and efficient prcess, supervisry authrities shuld be able t request that insurance and reinsurance undertakings make alteratins t an applicatin befre deciding whether t accept r reject that applicatin. (6) The prvisins shall apply in a cnsistent manner fr grups and sl undertakings. 2 OJ L 335, , p /29

8 (7) This Regulatin is based n the draft implementing technical standards submitted by the Eurpean Insurance and Occupatinal Pensins Authrity t the Cmmissin. (8) The Eurpean Insurance and Occupatinal Pensins Authrity has cnducted pen public cnsultatins n the draft implementing technical standards n which this Regulatin is based, analysed the ptential related csts and benefits and requested the pinin f the Insurance and Reinsurance Stakehlder Grup established by Article 37 f Regulatin (EU) N 1094/2010. HAS ADOPTED THIS REGULATION: Article 1 - Subject matter and scpe (1) This Regulatin lays dwn the prcedures t be fllwed fr the apprval f the applicatin f a matching adjustment referred t in Article 77b f Directive 2009/138/EC. Article 2 Applicatin t use a Matching Adjustment (1) Insurance and reinsurance undertakings applying t use a matching adjustment shall submit a written applicatin fr prir supervisry apprval. (2) The applicatin shall be submitted in ne f the fficial languages f the Member State in which an insurance r reinsurance undertaking has its head ffice, r in a language previusly authrised by the supervisry authrity, and shall cntain at least the infrmatin required by Articles 3 t 6 f this Regulatin. (3) Insurance and reinsurance undertakings shall ensure that the applicatin includes any ther relevant infrmatin that may be necessary fr an assessment and decisin by the supervisry authrity. (4) Where a single applicatin is submitted in respect f mre than ne prtfli f insurance r reinsurance bligatins, the applicatin shall set ut the evidence required by Articles 3 t 6 f this Regulatin separately fr each prtfli that is cvered by the applicatin. (5) The applicatin shall be apprved by the administrative, management r supervisry bdy f the insurance r reinsurance undertaking. Dcumentary evidence f this apprval shall be submitted. Article 3 Cntent f the Written Applicatin relating t the Assigned Prtfli f Assets (1) In relatin t the assigned prtfli f assets required by Article 77b(1)(a) f Directive 2009/138/EC, the applicatin shall include at least the fllwing: (a) evidence that the assigned prtfli f assets meets all f the relevant criteria specified in Article 77b(1) f Directive 2009/138EC; 8/29

9 (b) details f the assets within the assigned prtfli, which shall cnsist f line-by-line asset infrmatin tgether with the prcedure used t grup such assets by asset class, credit quality and duratin fr the purpses f determining the fundamental spread referred t in paragraph 1(b) f Article 77c f Directive 2009/138/EC; (c) a descriptin f the prcess used t maintain the assigned prtfli f assets in accrdance with Article 77b(1)(a) f Directive 2009/138/EC, including the prcess fr maintaining the replicatin f expected cash-flws where these have materially changed. Article 4 Cntent f the Written Applicatin relating t the Prtfli f Insurance r Reinsurance Obligatins (1) In relatin t the prtfli f insurance r reinsurance bligatins t which the matching adjustment is intended t apply, the applicatin shall cntain at least the fllwing: (a) evidence that the insurance r reinsurance bligatins meet all f the criteria specified in Article 77b(1)(d), (e), (g) and (j) f Directive 2009/138/EC; (b) where mrtality risk is present, quantitative evidence that the best estimate f the prtfli f insurance r reinsurance bligatins des nt increase by mre than 5% under the mrtality risk shck specified in [Article 42 ]. Article 5 Cntent f the Written Applicatin relating t Cash-flw Matching and Prtfli Management (1) In relatin t the cash-flw matching and management f the eligible prtfli f bligatins and the assigned prtfli f assets, the applicatin shall cntain at least the fllwing: (a) quantitative evidence that the criteria f Article 77b(1)(c) f Directive 2009/138/EC are met, including a quantitative and qualitative assessment f whether any mismatch gives rise t risks which are material in relatin t the risks inherent in the insurance business t which the matching adjustment is intended t be applied; (b) evidence that adequate prcesses are in place t prperly identify, rganise and manage the prtfli f bligatins and assigned prtfli f assets separately frm ther activities f the undertaking, and t ensure that the assigned assets will nt be used t cver lsses arising frm ther activities f the undertaking, in accrdance with Article 77b(1)(b) f Directive 2009/138/EC; (c) evidence that the wn funds have been adjusted in accrdance with [Article 70 RFFOF2] t reflect any reduced transferability; 9/29

10 (d) evidence that the Slvency Capital Requirement apprpriately reflects any reduced scpe fr risk diversificatin. Where relevant this shall include evidence f cmpliance with [Articles 194 RFFSCR1 and 195 RFFSCR2]. Article 6 Additinal Cntent f the Written Applicatin (1) In additin t the material specified in Articles 3 t 5 f this Regulatin, the applicatin shall als include: a) cnfirmatin that the cnditins f Article 77b(3) f Directive 2009/138/EC are met; b) the liquidity plan required under Article 44(2) f Directive 2009/138/EC; c) the assessments required under Article 44(2a)(b) f Directive 2009/138/EC; d) the assessments required under Article 45(2a) f Directive 2009/138/EC; e) a detailed explanatin and demnstratin f the calculatin prcess used t determine the matching adjustment in accrdance with the requirements f Article 77c f Directive 2009/138/EC; f) infrmatin abut ther applicatins submitted by the insurance r reinsurance undertaking, r currently freseen within the next six mnths, fr apprval f any f the items listed in Article 308a(2) f Directive 2009/138/EC, tgether with the crrespnding applicatin dates. Article 7 Assessment f the Applicatin (1) The supervisry authrity shall cnfirm receipt f the applicatin f the insurance r reinsurance undertaking. The supervisry authrity shall nt cnsider an applicatin t be cmplete until the applicatin cntains all f the evidence required by Articles 2 t 6 f this Regulatin. Where the supervisry authrity has cnsidered an applicatin t be cmplete, this shall nt prevent the supervisry authrity frm requesting additinal evidence relevant fr the purpse f its assessment and decisin, shuld this be necessary during the assessment. (2) Within 30 days f the receipt f an applicatin, the supervisry authrity shall determine whether the applicatin is cmplete and cmmunicate this in writing. Where an applicatin is determined t be incmplete, the supervisry authrity shall specify what additinal infrmatin and evidence is required t cmplete the applicatin. (3) The assessment f the applicatin shall invlve nging cmmunicatin with the insurance r reinsurance undertaking and may include requests fr adjustments frm supervisry authrities t the way the undertaking prpses t apply a matching adjustment. If the supervisry authrity determines that it is pssible t apprve the applicatin f a matching adjustment subject t adjustments t the applicatin being made, it may ntify this t the insurance and reinsurance undertaking. 10/29

11 (4) The supervisry authrity shall ensure that the time perid t cnsider the applicatin and cmmunicate its decisin des nt exceed 6 mnths frm the receipt f the cmplete applicatin. (5) Ntwithstanding paragraph 4, the days between the date the supervisry authrity requests further evidence r adjustments and the date the supervisry authrity receives such infrmatin shall nt be included within the perid f time stated in paragraph 4. (6) Failure by the supervisry authrity t make a decisin within the perid referred t in paragraph 5 shall nt result in the applicatin being cnsidered as apprved. (7) Insurance and reinsurance undertakings shall ensure that all the evidence required by the supervisry authrity is made available t it, including in electrnic frm, thrughut the assessment f the applicatin. (8) If, fllwing a request frm the supervisry authrity fr further evidence r adjustments, an undertaking makes a change t its applicatin, this shall nt be cnsidered as a new applicatin. (9) Where an undertaking infrms the supervisry authrity f a change t its applicatin ther than in the situatin described in paragraph 8 abve, this shall be treated as a new applicatin unless the supervisry authrity cnsiders that the change des nt significantly affect the assessment and decisin n the apprval f the applicatin within the time perid set ut in paragraph 3. (10) An undertaking may withdraw an applicatin by ntificatin in writing at any stage prir t the decisin f the supervisry authrity. In the case that an applicatin is withdrawn, any updated r resubmitted applicatin shall be treated as a new applicatin. Article 8 Decisin n the applicatin (1) The supervisry authrity shall nly apprve an applicatin fr the use f a matching adjustment if, n the basis f the written applicatin, and any additinal infrmatin received, the criteria set ut in Article 77b and the calculatin requirements set ut in Article 77c f Directive 2009/138/EC are satisfied. (2) The supervisry authrity may cnsider ther factrs relevant t the use f a matching adjustment by insurance and reinsurance undertakings when reaching a decisin n the apprval f the applicatin. (3) The supervisry authrity s decisin as t whether t apprve the applicatin shall be cmmunicated in writing in the same language as the applicatin. (4) Where a single applicatin has been received in respect f mre than ne prtfli f insurance r reinsurance bligatins, the supervisry authrity may decide t apprve the applicatin in respect f sme but nt all f the prtflis included in the applicatin. In this 11/29

12 case, the written cmmunicatin f the decisin shall specify t which prtflis f insurance and reinsurance bligatins a matching adjustment can be applied. (5) Where the supervisry authrity decides t reject an applicatin, fr sme r all f the prtflis included within an applicatin, it shall state clearly the reasns fr this decisin. (6) Insurance and reinsurance undertakings shall nt use a matching adjustment fr a prtfli until its applicatin in respect f that prtfli has been assessed and apprved by the supervisry authrity. Insurance and reinsurance undertakings shall nt cnsider an applicatin in respect f a prtfli t have been apprved until written ntificatin f the apprval has been received frm the supervisry authrity. Article 9 Revcatin f apprval by the supervisry authrity (1) Where the supervisry authrity cnsiders that an insurance r reinsurance undertaking with apprval t use a matching adjustment has ceased t cmply with the cnditins set ut in Articles 77b r 77c f Directive 2009/138/EC, it shall infrm the insurance r reinsurance undertaking immediately and explain the nature f the nn-cmpliance. In this case, the insurance r reinsurance undertaking shall: a) restre cmpliance with these cnditins within tw mnths; b) remedy any gvernance failure that led t the nn-cmpliance with these cnditins nt being identified r reprted t the supervisry authrity in accrdance with Article 77b(2) f Directive 2009/138/EC; c) and demnstrate t the satisfactin f the supervisry authrity that it has dne s. (2) Where an insurance r reinsurance undertaking is unable t restre cmpliance with the cnditins specified in Article 77b and 77c f Directive 2009/138/EC within tw mnths, it shall cease applying the matching adjustment t any f the insurance r reinsurance bligatins within the prtfli(s) fr which these cnditins have been breached. The insurance r reinsurance undertaking shall nt apply the matching adjustment t the relevant prtfli(s) again fr a perid f 24 mnths, and then nly after prir apprval by the supervisry authrity in accrdance with the prcedures set ut in Articles 2 t 8 f this Regulatin. Article 10 - Entry int frce (1) This Regulatin shall enter int frce n the twentieth day fllwing that f its publicatin in the Official Jurnal f the Eurpean Unin. This Regulatin shall be binding in its entirety and directly applicable in all Member States. 12/29

13 Dne at Brussels, [ ] [Fr the Cmmissin The President] [On behalf f the President] [Psitin] 13/29

14 Annex I: Impact Assessment Prcedural issues and cnsultatin f interested parties This impact assessment was develped by EIOPA during the drafting f the implementing technical standards (ITS) n prcedures t be fllwed fr apprval f the applicatin f a matching adjustment. It presents the key plicy questins and assciated plicy ptins that were cnsidered when develping the draft ITS. Prblem definitin Article 77b f Directive 2009/138/EC permits insurance and reinsurance undertakings t apply a matching adjustment t the relevant risk-free interest rate term structure when calculating the best estimate f a prtfli f life insurance r reinsurance bligatins, including annuities stemming frm nn-life insurance r reinsurance cntracts, subject t prir apprval by the supervisry authrities where certain specified cnditins are met. The principles fr the calculatin f the matching adjustment are specified in Article 77c. The ITS specify the prcedures t be fllwed by: Insurance and reinsurance undertakings when applying fr apprval f the use f a matching adjustment; and supervisry authrities in cnsidering apprval fr the use f a matching adjustment. In the absence f an ITS specifying the prcedure fr supervisry apprval f the matching adjustment, supervisry authrities and insurance and reinsurance undertakings wuld need t make their wn interpretatin f the Level 1 and Level 2 requirements fr this prcedure. This culd result in very different interpretatins f the Slvency II regulatry text, nt just between undertakings and natinal supervisry authrities within a Member State, but als between stakehlders in different Member States. This culd result in a lack f harmnisatin and cnsistency in supervisry practices acrss Member States, hindering effective cmpetitin. Fr the supervisry authrity t assess an applicatin against the required criteria, they must have access t a well-dcumented written applicatin that prvides full, clear and accurate infrmatin. Dcumentatin als helps t aid transparency and creates an audit trail fr supervisry decisin-making and judgement. T maximise efficient use f resurces and t ensure a prcess that is prprtinate and fcused, there is a need fr clear, n-ging cmmunicatin between undertakings and supervisry authrities during the applicatin prcess. Fr transparency and clarity, imprtant decisins shuld be cmmunicated in writing. Once a cmplete applicatin has been received, the supervisry authrity must make a decisin n the applicatin and cmmunicate that decisin within a reasnable 14/29

15 amunt f time. There is a trade-ff between allwing the supervisry authrity enugh time t make a cnsidered decisin, and prviding a timely respnse t the undertaking. Because f differences in natinal administrative law, it is als necessary t set ut clearly hw an undertaking shuld interpret the situatin where a supervisry authrity des nt reach a decisin n the applicatin befre the expiry f the alltted time perid. After an undertaking has received initial apprval t use a matching adjustment, there may be changes, fr example t the assigned prtfli f assets r bligatins, t the undertaking s risk prfile, r t the way that the undertaking wishes t identify, rganise and manage the matched prtfli. These changes may impact the calculatin, size r applicatin f the matching adjustment withut necessarily making the undertaking ineligible t apply the matching adjustment t the prtfli. The supervisr will need t be cnfident that fllwing any changes, the undertaking remains eligible t apply the adjustment. Baseline When analysing the impact f alternative prpsed plicies, the impact assessment methdlgy uses a baseline scenari as the basis fr cmparing plicy ptins. This helps t identify the incremental impact f each plicy ptin cnsidered. The aim f the baseline scenari is t explain hw the current situatin wuld evlve withut additinal regulatry interventin. The baseline is based n the current situatin f the market, which is cnsidered t be cmpsed f: The prgress twards Slvency II that insurance and reinsurance undertakings have already achieved at this stage, cnsidering the average state f art f EU insurance and reinsurance undertakings, Prgress fr the implementatin f Slvency II envisaged by any ther elements f its framewrk. In particular the baseline fr this ITS includes: the cntent f Directive 2009/138/EC and any amendment already agreed t it; and where relevant, and prvided there is evidence f its public availability at the date f apprval f the cnsultatin f these technical standards by EIOPA, any reliable backgrund n the likely cntent f the draft f Level 2 delegated acts and technical standards develping the afrementined directive. Sectin 3. Objectives pursued Plicy Objective: Cnsistent implementatin f the apprval prcess fr the Matching Adjustment acrss Member States, including: the required evidence; the factrs fr the supervisr t cnsider; the timeframes; and the cmmunicatin between undertakings and supervisrs. 15/29

16 This plicy bjective crrespnds t the fllwing specific and general bjectives fr the Slvency II Directive: Specific bjectives advance supervisry cnvergence and cperatin; and imprved risk management f EU insurers. General bjectives enhanced plicyhlder prtectin. Sectin 4. Plicy Optins Nte n ptins discarded during the plicy-making prcess EIOPA has received legal feedback that an apprval prcess that des nt refer t specific, already existing prtflis is incmpatible with the Level 1 Directive. Therefre, ther appraches (e.g. appraches invlving the granting f apprval fr prspective prtflis) have nt been cnsidered as available plicy ptins. EIOPA has als received cnfirmatin that the Level 1 Directive requires the verificatin f the cnditins t be met t apply a matching adjustment fr each relevant prtfli during the apprval prcess. Therefre ther appraches (e.g. appraches invlving a general assessment f the ability f insurance and reinsurance undertakings t meet the cnditins fr using a matching adjustment) have nt been cnsidered as available plicy ptins. Nte n areas f the ITS where there is n plicy alternatives Fr certain aspects f the ITS, EIOPA des nt cnsider that there was any plicy alternative. This is particularly the case fr aspects f the ITS that directly reflect the requirements f the Level 1 and Level 2 Text. Fr example, the required cntent f the applicatin set dwn in Articles 2 t 6 f the ITS reflects the eligibility criteria in Article 77b. The requirement t demnstrate hw the calculatin f the Matching Adjustment has been perfrmed is necessary t ensure the undertaking s cmpliance with Article 77c. The liquidity plan, sensitivity analysis and ORSA assessment f nging cmpliance with capital requirements are risk management tls that are required f all undertakings using a matching adjustment, and prvide additinal evidence as t whether the use f a matching adjustment is apprpriate. Plicy issue 1: Structure f the written applicatin (Articles 2 t 6) Optin A: Specify what infrmatin must be prvided in an applicatin, but allw undertakings freedm ver the dcumentatin frmat. Optin B: Specify a standardised template in which the required infrmatin shuld be submitted. Plicy issue 2: Ability t submit a single written applicatin fr multiple prtflis f bligatins (Article 2.4) 16/29

17 Optin A: Allw undertakings t submit a single applicatin in respect f multiple prtflis f insurance r reinsurance bligatins (prvided the evidence required fr each prtfli is set ut separately). Optin B: Require a separate applicatin fr each prtfli f insurance r reinsurance bligatins. Plicy issue 3: Time limit t determine whether an applicatin is cmplete (Article 7.2) Optin A: Specify that a supervisry authrity shuld determine whether an applicatin is cmplete within 30 days f receiving the applicatin. Optin B: N prescribed time limit fr a supervisry authrity t determine that an applicatin is cmplete. Plicy issue 4: Time limit t assess and decide n an applicatin (Article 7.4) Optin A: Specify that the time taken by the supervisry authrity t assess and decide n an applicatin shuld nt exceed six mnths. Optin B: N prescribed time limit fr the supervisry authrity t assess and decide n a cmplete applicatin. Plicy issue 5: Interpretatin f silence f the supervisry authrity (if n decisin is reached r cmmunicated within the time limit) (Article 7.6) Optin A: Specify that silence by the supervisry authrity des nt imply acceptance f an applicatin. Optin B: D nt specify the meaning f the supervisry authrity s silence; the interpretatin fllws the usual practice f natinal administrative law. Plicy issue 6: Cpy f dcumentatin and evidence in electrnic frmat (Article 7.7) Optin A: Require a cpy f all dcumentatin and evidence t be prvided in electrnic frmat. Optin B: D nt require a cpy f all dcumentatin and evidence t be prvided in electrnic frmat. Plicy issue 7: Time taken by undertakings t prvide any further evidence r adjustments requested by the supervisry authrity (Article 7.5) Plicy ptin A: The time taken by the undertaking t prvide the supervisry authrity with further evidence r t execute the adjustments is nt included within the verall time perid fr a decisin n the applicatin (autmatic stp-the-clck mechanism) 17/29

18 Plicy ptin B: When the supervisry authrity requests further evidence r adjustments the undertaking may request a suspensin f the time perid fr a decisin n the applicatin ( stp-the-clck mechanism nly at the request f the undertaking) Plicy issue 8: Request fr adjustments t an applicatin (Article 8.3) Optin A: Rather than prviding nly a yes/n decisin, allw supervisry authrities t request adjustments t an applicatin, r t ntify an undertaking that it wuld be pssible t apprve an applicatin subject t certain adjustments. Optin B: Require supervisry authrities t prvide nly a yes/n decisin t undertakings that have applied t use a matching adjustment. Sectin 5. Analysis f Impacts Plicy issue 1: Structure f the written applicatin (Articles 2 t 6) Optin A: Specify the required infrmatin t be prvided in an applicatin, but allw undertakings freedm regarding hw the infrmatin is dcumented. Csts Prvides flexibility in preparatin f matching adjustment applicatins by undertakings. Ensures that relevant infrmatin is nt mitted frm an applicatin slely because a request fr that infrmatin des nt appear in the template. Infrmatin relating t an applicatin t use a matching adjustment is undertaking-specific. A free-frm applicatin cntaining the required infrmatin allws the undertaking-specific nature f the matching adjustment prtfli t be fully reflected in the applicatin. N csts identified fr EIOPA r plicyhlders. Ptential small additinal cst fr supervisry authrities due t incnsistency between applicatins submitted by different undertakings. This culd translate int a small additinal cst fr undertakings because f a slight delay in receiving a decisin n (a) whether the applicatin is cmplete and (b) whether the cmplete applicatin is apprved. Optin B: Prvide a standardised template n which the required infrmatin shuld be submitted. 18/29

19 Csts A standardised template prvides cnsistency between applicatins submitted by different undertakings. It may als allw supervisry authrities t identify missing infrmatin in applicatins mre quickly. A standardised template may lead t fewer incmplete applicatins submitted t supervisry authrities. This culd reduce administratin csts, requests fr additinal infrmatin, and pssibly expedite decisins by supervisry authrities. Develpment and maintenance f templates fr the submissin f required infrmatin wuld create resurcing csts fr EIOPA. A standardised template may nt reflect the undertaking-specific nature f infrmatin required by supervisry authrities t cnsider an applicatin t use a matching adjustment. As such, it wuld nt rule ut requests fr additinal infrmatin by supervisry authrities. Adherence t standardised templates may bscure r divert attentin away frm matters f substance, restricting the supervisry authrity s ability t reach a timely decisin. Plicy issue 2: Ability t submit a single written applicatin fr multiple prtflis f bligatins (Article 2.4) Optin A: Undertakings may chse t submit a single written applicatin seeking apprval t apply a matching adjustment in respect f multiple prtflis f insurance r reinsurance bligatins (prvided the evidence required fr each prtfli is set ut separately). Csts This ptin streamlines the applicatin prcess, reducing the paperwrk and submissin csts incurred by undertakings seeking apprval t apply a matching adjustment t multiple prtflis f bligatins. A single applicatin may make it easier fr undertakings t manage the applicatin prcess. Fr supervisry authrities, fewer separate applicatins shuld reduce administrative burden and facilitate clearer cmmunicatin with undertakings regarding their applicatins. This ptin still allws an undertaking t submit separate applicatins fr separate prtflis if it wishes t d s, and thus des nt restrict undertakings chice in this respect. Ptential cst t undertakings, in that a request by the supervisry authrity fr additinal evidence in respect f ne prtfli (r a subset f prtflis) will stp the clck n all ther prtflis included in the applicatin, regardless if n additinal evidence is required in respect f thse prtflis. N csts identified fr EIOPA, supervisry authrities, and plicyhlders. 19/29

20 Optin B: A separate written applicatin shuld be submitted in respect f each prtfli f bligatins t which an undertaking wishes t apply a matching adjustment. Csts N additinal benefits versus Optin A have been identified fr this ptin, as Optin A permits undertakings t pursue this apprach shuld they wish t d s. Mandating the use f separate written applicatins wuld ptentially lead t additinal csts fr bth undertakings (in preparatin f multiple separate applicatins) and supervisry authrities (in cnsideratin f multiple separate applicatins). Plicy issue 3: Upper limit f 30 days t determine whether an applicatin is cmplete (Article 7.2) Optin A: The supervisry authrity shuld determine whether an applicatin is cmplete within 30 days f receipt f an applicatin. Csts A 30 day perid is cnsistent with the (sl) Internal Mdel Apprval Prcess (IMAP). A 30 day perid shuld prvide a reasnable amunt f time fr a supervisry authrity t check the evidence submitted with an applicatin and decide n whether r nt an applicatin is cmplete. The 30 day perid represents an upper limit. Fr simple applicatins, supervisry authrities are free t cmmunicate this decisin t undertakings sner. A 30 day upper limit shuld lead t bradly cnsistent timeframes acrss different Member States fr supervisry authrities t decide n whether applicatins are cnsidered cmplete. A 30 day time limit might lead t additinal csts fr supervisry authrities, especially in the event f large vlumes f applicatins being received in respect f the matching adjustment alngside ther apprval prcesses (e.g. IMAP, Ancillary Own Funds, etc.). Optin B: D nt specify a time limit in which a supervisry authrity shuld determine whether an applicatin is cmplete, and leave it t supervisry authrities t determine an apprpriate time frame. Csts Ptentially lwer csts fr supervisry authrities than Optin A (as the supervisr can use its discretin t manage the resurce burden f assessing a large vlume f simultaneus applicatins). Under this ptin, undertakings wuld have far less clarity n the verall time required t receive a decisin n a matching adjustment applicatin. 20/29

21 Under this ptin, there wuld be n way t ensure a cnsistent and harmnised timeframe in which supervisry authrities decide whether r nt matching adjustment applicatins are cnsidered cmplete. There is a risk that supervisry authrities take much lnger than 30 days t decide n whether r nt an applicatin is cnsidered cmplete. This culd lead t increased cst via uncertainty and extra resurce burden fr undertakings. Plicy issue 4: Upper limit f 6 mnths n the cnsideratin perid f a written applicatin (Article 7.4) Optin A: Specify within the ITS that the cnsideratin perid fr applicatins shuld nt exceed six mnths. Csts A cnsideratin perid capped at 6 mnths is cnsistent with the 6 mnth decisin perid allwed fr the Internal Mdel Apprval Prcess. As a matching adjustment applicatin is very unlikely t be mre cmplicated than an applicatin t use an Internal Mdel, a decisin perid fr the matching adjustment that is lnger than the decisin perid fr the Internal Mdel wuld be inapprpriate. A six mnth decisin perid shuld prvide a reasnable amunt f time fr a supervisry authrity t cme t a cnsidered decisin n even the mst cmplex applicatins t use the matching adjustment. Fr simpler applicatins where the full six mnth cnsideratin perid is nt required t reach a decisin, supervisry authrities are free t cmmunicate their decisin t undertakings sner. A six mnth cap shuld lead t bradly cnsistent cnsideratin perids fr assessment f matching adjustment applicatins between different Member States. A six mnth time limit might lead t additinal csts fr supervisry authrities (due t resurce csts f meeting the deadline), especially if large vlumes f applicatins are received simultaneusly in respect f the matching adjustment and ther apprval prcesses (e.g. IMAP, AOF, etc.). Optin B: D nt specify a cnsideratin perid within the ITS, and leave it t supervisry authrities t determine an apprpriate time frame. Csts This ptin wuld allw a supervisry authrity the freedm t set the cnsideratin perid accrding t the specifics f each applicatin, thereby allwing the administrative burden f cnsidering the applicatin t be managed and the cnsideratin perid being tailred t the cmplexity f the applicatin. Under this ptin, there wuld be n way t ensure a cnsistent and harmnised timeframe between supervisry authrities. This may cause 21/29

22 particular difficulties and lead t increased csts fr supervisry authrities in respect f grup supervisin. There is a risk that supervisry authrities take lnger than 6 mnths t reach a decisin n applicatins, especially during busy perids. This culd lead t increased cst via uncertainty and extra resurce burden fr undertakings. It culd als interfere with decisins n ther applicatins (e.g. AOF, IMAP, etc.), leading t increased csts fr bth undertakings and supervisry authrities. Plicy issue 5: Silence f Supervisry Authrity after 6 mnths shuld nt be taken as apprval (Article 7.6) Optin A: Silence after the cnsideratin perid is nt taken as acceptance, cnsistently acrss all jurisdictins. This ptin wuld ensure that if the cnsideratin perid ends and a supervisry authrity has nt yet reached a decisin, an undertaking will nt incrrectly cnclude that its applicatin has been apprved. It wuld als ensure cnsistency between jurisdictins. Csts N csts identified fr EIOPA r plicyhlders. Shuld a supervisr fail t reach a judgement after 6 mnths, they will need t cmmunicate this t the undertaking. As the undertaking cannt take silence t indicate apprval, they may incrrectly assume that silence indicates a rejectin f the applicatin. Optin B: Supervisrs fllw the usual practice f their lcal jurisdictin. Csts This ptin wuld ensure that nce the cnsideratin perid has ended, the undertaking culd draw a cnclusin (accrding t usual lcal practice) if it des nt receive any cmmunicatin frm the supervisr. The treatment f the matching adjustment applicatin wuld be cnsistent with lcal practice fr ther similar regulatry applicatins. The cnclusin the undertaking draws may nt actually match the decisin the supervisry authrity wishes t make (albeit that the supervisr was unable t reach that decisin within the six mnth cnsideratin perid). This ptin might lead t undertakings applying the matching adjustment where this wuld nt be apprpriate (r nt applying it where they wuld be eligible). This ptin wuld lead t a lack f harmnisatin acrss jurisdictins. 22/29

23 Plicy issue 6: Shuld undertakings be required t prvide evidence in electrnic frmat? (Article 7.7) Optin A: Require undertakings t prvide evidence in supprt f an applicatin in electrnic frmat. Csts This will facilitate mre efficient assessment f matching applicatins by supervisry authrities, which is ultimately likely t lead them t reach mre rbust decisins in a mre timely manner. N csts identified fr undertakings, wh are very likely t prduce evidence in electrnic frmat when cmpiling a matching adjustment applicatin. N csts identified fr EIOPA, supervisry authrities and plicyhlders. Optin B: D nt specify the frmat in which undertakings prvide evidence in supprt f an applicatin. Csts This ptin leads t flexibility, in that it des nt restrict the frmat in which undertakings can submit evidence in respect f a matching adjustment applicatin. Under this ptin, undertakings may chse t submit evidence in electrnic frmat, and s des nt restrict undertakings chice in this respect. This ptin may lead t significant/material csts fr supervisry authrities if undertakings submit quantitative evidence in nn-electrnic frmat (i.e. if supervisry authrities need t input hardcpy data int electrnic frmat). This wuld increase the burden f assessing matching adjustment applicatins, ptentially leading t lnger applicatin cnsideratin perids. Plicy issue 7: Time taken by undertakings t prvide any further evidence r adjustments requested by the supervisry authrity (article 7.5) Plicy ptin A: The time taken by the undertaking t prvide the supervisry authrity with further evidence r t execute the adjustments is nt included within the verall time perid fr a decisin n the applicatin (autmatic stp-the-clck mechanism) This ptin wuld establish an autmated prcess which shuld be clear t all stakehlders invlved and wuld nt require additinal discussins between undertakings and supervisry authrities. 23/29

24 This ptin wuld ensure that an undertaking has adequate time t address the request frm the supervisry authrity withut jepardising the apprval f the applicatin. Csts The verall time perid fr a decisin n an applicatin wuld nt be fixed and may ultimately be lnger than the time allwed fr in the regulatin, in particular where a supervisry authrity needs t request further infrmatin r adjustments n multiple ccasins. A fixed time perid wuld be expected t assist undertakings in their planning, in particular if they submit a number f different applicatins t supervisry authrities simultaneusly. Plicy ptin B: When the supervisry authrity requests further evidence r adjustments the undertaking may request a suspensin f the time perid fr a decisin n the applicatin ( stp-the-clck mechanism nly at the request f the undertaking) The undertaking wuld have certainty that the maximum amunt f time that the supervisry authrity will take t decide n their applicatin will be fixed, unless the undertaking itself requests a suspensin. Csts The likelihd f an undertaking needing t submit subsequent applicatins is expected t be increased under this ptin. Where an undertaking did nt request a suspensin f the time perid, the supervisry authrity may nt have sufficient time t review the evidence r adjustments and be satisfied that the necessary cnditins fr apprval are met. The undertaking wuld then have t decide if it wishes t submit a new applicatin. Significant additinal csts bth t undertakings and supervisry authrities frm having t submit an additinal applicatin where a previus applicatin was rejected. This wuld entail administrative csts, fr example, each applicatin will need t be apprved by the administrative, management and supervisry bdy f the undertaking, and similarly the decisin t reject an applicatin will require apprval at a senir level within the supervisry authrity. Mre imprtantly, the need fr the undertaking t wait fr up t a further six mnths, befre ptentially being able t t apply the matching adjustment] (subject t supervisry apprval f the resubmitted applicatin), wuld present significant pprtunity csts t the undertaking. As the prcess wuld nt be autmatic, there wuld need t be additinal cmmunicatin between the supervisry authrity and the undertaking, thereby resulting in sme minr additinal csts t bth parties. 24/29

25 Plicy issue 8: Shuld supervisry authrities be able t suggest amendments t an applicatin rather than a simple yes/n answer? (Article 8.3) Optin A: Rather than prviding nly a yes/n decisin, supervisry authrities may ntify an undertaking regarding amendments t an applicatin if it determines that it wuld be pssible t apprve the applicatin subject t thse amendments. Csts This ptin permits flexible assessment f applicatins by supervisry authrities. In particular, fr applicatins which supervisry authrities feel it might be pssible t apprve subject t amendments t the applicatin, this ptin wuld expedite apprval, which might therwise nly be pssible thrugh rejectin and re-submissin f an amended applicatin by undertakings. Under this ptin, supervisry authrities may chse t prvide a yes/n decisin (alng with justificatins if an applicatin is declined), s it des nt restrict the supervisr s chice in this respect. This is likely t be relevant if an applicatin is prly cmpiled, with weak supprting evidence, r if the undertaking is unwilling t engage in cnstructive dialgue with the supervisry authrity during the assessment prcess. This ptin might t lead t increased csts fr supervisry authrities in respect f cmmunicatin and management f an applicatin in the case where the decisin is nt n a yes/n basis. Hwever, the added flexibility is likely t reduce csts verall fr supervisry authrities and undertakings, cmpared with the alternative f declining an applicatin and subsequent re-submissin f a new amended applicatin by undertakings. Optin B: Supervisry authrities shuld prvide a yes/n decisin t undertakings in respect f an applicatin t use a matching adjustment. Csts Supervisry authrities may be able t reach yes/n decisins mre quickly, thereby expediting cnsideratin f applicatins. Ptentially significant additinal csts fr undertakings in preparatin f, and fr supervisry authrities in cnsideratin f, fllw-up applicatins fllwing an initial rejectin. Sectin 6. Cmparisn f Optins Plicy issue 1: Structure f the written applicatin (Articles 2 t 6) 25/29

26 The preferred plicy ptin fr this plicy issue is Optin A: specify the required infrmatin t be prvided in an applicatin, but allw undertakings freedm regarding hw the infrmatin is dcumented. This ptin shuld nt lead t further csts fr undertakings, but extra csts are likely t be incurred by supervisry authrities, in respect f cnsidering incnsistent applicatins submitted by different undertakings. Despite these additinal csts, this flexible apprach shuld enable supervisry authrities t reach the desired utcme in a cnsistent way, as specified in the bjective: a flexible applicatin prcess resulting in applicatins which are fitfr-purpse, and reflect the undertaking-specific nature f the matching adjustment prtfli. Optin B has been disregarded because the benefits affrded by this ptin are nt guaranteed t materialise, whereas the csts fr this ptin are likely t be material. Plicy issue 2: Ability t submit a single written applicatin fr multiple prtflis f bligatins (Article 2.4) The preferred plicy ptin fr this plicy issue is Optin A: undertakings may chse t submit a single written applicatin seeking apprval t apply a matching adjustment in respect f multiple prtflis f insurance r reinsurance bligatins (prvided the evidence required fr each prtfli is set ut separately). This ptin has the ptential t reduce csts and administrative burden fr bth undertakings and supervisry authrities, and des nt prevent undertakings frm submitting separate applicatins fr each prtfli shuld they wish t d s. This flexible apprach supprts the bjective fr this ITS. Optin B has been disregarded because it leads t additinal csts and administrative burden cmpared with ptin A, with n additinal benefits. Undertakings will be required t submit the same infrmatin fr bth ptins A and B, with ptin A ffering the ability fr undertakings t use a cndensed frmat that avids unnecessary duplicatin. Plicy issue 3: Upper limit f 30 days t determine whether an applicatin is cmplete (Article 7.2) The preferred plicy ptin fr this issue is Optin A: specify within the ITS that a supervisry authrity shuld determine whether an applicatin is cmplete within 30 days f receipt f an applicatin. This ptin prvides a reasnable perid f time in which supervisry authrities can initially assess applicatins fr cmpleteness, which is cnsistent with prtcls fr ther apprval prcesses (e.g. sl Internal Mdel Apprval Prcess). Furthermre, this ptin des nt restrict supervisry authrities frm reaching a decisin n the cmpleteness f applicatins and cmmunicating this decisin t undertakings befre the 30 day limit has elapsed, if it is in a psitin t d s. A cmmn 30 day cap acrss all Member States will help t achieve the bjective fr this ITS, and shuld help t ensure decisins are reached and cmmunicated t undertakings within a reasnable perid f time. It will als prvide clarity fr bth undertakings and supervisry authrities regarding the perating timeframe arund initial cnsideratin f matching adjustment applicatins. Optin B has been discarded because natinal supervisry authrity discretin des nt cntribute twards achieving the bjective f this ITS, i.e. cnsistent implementatin acrss Member States, and withut a mandated initial applicatin cmpleteness cnsideratin perid, there is a risk that supervisry authrities might 26/29

27 take an unreasnable amunt f time t cmmunicate t undertakings n the cmpleteness f their matching adjustment applicatins. This ptin is als incnsistent with ther apprval prcesses (e.g. Ancillary Own Funds and IMAP), and culd lead t cnsiderable uncertainty fr undertakings with respect t their matching adjustment applicatin(s). Plicy issue 4: Upper limit f 6 mnths n the cnsideratin perid f a written applicatin (Article 7.4) The preferred plicy ptin fr this issue is Optin A: specify within the ITS that the cnsideratin perid fr applicatins shuld nt exceed six mnths. This ptin gives supervisry authrities the ability t cnsider applicatins within a reasnable perid f time, which is cnsistent with the cnsideratin perid allwed fr in the Internal Mdel Applicatin Prcess. In additin, ptin A des nt restrict supervisry authrities frm reaching a decisin befre the full six mnth cnsideratin perid has elapsed, if it is in a psitin t d s. This ptin will help twards achieving the bjective, i.e. cnsistent implementatin between Member States, and means that undertakings will receive decisins in respect f applicatins within a reasnable perid f time. It will als prvide clarity fr bth undertakings and supervisry authrities regarding the perating timeframe arund full cnsideratin f matching adjustment applicatins. Optin B has been discarded because natinal supervisry authrity discretin des nt cntribute twards achieving the bjective f this ITS, i.e. cnsistent implementatin between Member States, and withut a mandated cnsideratin perid, there is a danger that supervisry authrities might take an unreasnable amunt f time t cnsider applicatins. This ptin is als incnsistent with ther apprval prcesses (e.g. AOF and IMAP), and culd lead t cnsiderable uncertainty fr undertakings with respect t their matching adjustment applicatin(s). Plicy issue 5: Silence f Supervisry Authrity after 6 mnths shuld nt be taken as apprval (Article 7.6) The preferred plicy ptin fr this issue is Optin A: Silence after the cnsideratin perid is nt taken as acceptance, cnsistently acrss all jurisdictins. This ptin prvides a clear and cnsistent message acrss all Member States that an undertaking shuld nt cnsider silence frm the supervisr t indicate apprval f a matching adjustment applicatin (which supprts the bjective fr this ITS). It als supprts the desired utcme that an undertaking can nly apply a matching adjustment if it receives prir supervisry apprval. Furthermre, this ptin leads t n additinal csts fr any stakehlders. Optin B has been disregarded because f the danger that an undertaking misinterprets silence frm the supervisr as indicating either acceptance r rejectin when this is in fact cntrary t the decisin the supervisr wishes t make. This ptin wuld nt supprt the bjective f achieving cnsistent implementatin acrss Member States. Plicy issue 6: Shuld undertakings be required t prvide evidence in electrnic frmat? (Article 7.7) 27/29

28 The preferred plicy ptin fr this issue is Optin A: require undertakings t prvide evidence in supprt f an applicatin in electrnic frmat. This ptin will nt lead t additinal csts fr undertakings, wh are very likely t prduce evidence in this frmat. As a cmmn requirement acrss all Member States this ptin will supprt the bjective. This ptin will als enhance supervisry cnsideratin f matching adjustment applicatins, and shuld help reduce the time required by supervisry authrities t cnsider applicatins. Optin B, while prviding ptinality fr undertakings regarding the frmat in which they submit evidence fr matching adjustment applicatins, culd increase the time and cst burden f assessing matching adjustment applicatins by supervisry authrities. Plicy issue 7: Time taken by undertakings t prvide any further evidence r adjustments requested by the supervisry authrity (Article 7.5) EIOPA cncluded that Optin A was the preferred ptin; the days between a request by a supervisry authrity fr further evidence r adjustments and receipt f such evidence r the executin f adjustments is nt included within the verall time perid fr the applicatin. EIOPA cnsidered ptin 1 t be a practical and wrkable apprach which balances the need fr undertakings t have certainty, with the csts assciated with the rejectin f an applicatin. It was felt that the ptential csts f an undertaking having t submit a new applicatin fr apprval were greater than the csts assciated with the fact that the time perid fr a supervisry authrity t decide n an applicatin may be extended. It was als nted that it shuld be pssible fr undertakings t manage the uncertainty arising frm the pssible revisins t the time perid. Upn receiving the request frm the supervisry authrity, the undertaking wuld knw that it needs t readjust its planning based n the nature f the request frm the supervisry authrity. Furthermre, this apprach wuld nly add marginally t the uncertainty that the undertaking will need t manage wing t the fact that the applicatin may nt be apprved. EIOPA als believed that an autmated prcess was preferable, since it wuld nt require additinal cmmunicatin between undertaking and supervisry authrity as t whether the undertaking intends t suspend the time perid. The safeguard t any unjustified delay t the assessment perid wuld be that a request fr further evidence by the supervisry authrity has t be necessary fr the assessment f the applicatin, such that withut such evidence, they may nt be in a psitin t apprve the applicatin. EIOPA cnsidered whether there was a sufficient incentive fr undertakings t either prvide the evidence r execute the adjustments immediately r, where this is nt pssible, t request a suspensin f the time perid. EIOPA felt that, whilst in general this incentive wuld be sufficient, there wuld be instances where de fact the evidence r adjusted applicatin is nt prvided n a timely basis. This culd mean that the supervisry authrity wuld nt have time t assess the evidence r adjusted applicatin and wuld need t reject the applicatin. Plicy issue 8: Shuld supervisry authrities be able t suggest amendments t an applicatin rather than a simple yes/n answer? (Article 8.3) 28/29