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DRAFT REPORT (COM(2021)0581 – C90367/2021 – 2021/0295(COD))

On the proposal for a directive of the European Parliament and of the Council Amending Directive 2009/138/EC as regards proportionality, quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks, group and cross-border supervision

ECON-PR-732668

Committee on Economic and Monetary Affairs · Rapporteur: Markus Ferber

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The draft report sets out Parliament's amendments to the proposed directive amending Directive 2009/138/EC on proportionality, supervision, reporting, long-term guarantees, macro-prudential tools, sustainability risks and group supervision. It raises the thresholds at which insurers fall outside the directive, widens the low-risk profile category and makes captives automatically low-risk, and simplifies the criteria for that category. It deletes the proposed climate change scenario analysis, the split of the solvency and financial condition report into two parts, and the audit requirement for that report. It deletes most of the proposed macro-prudential provisions and the group liquidity risk management chapter, and makes collaboration platforms mandatory for cross-border cases. It sets a 4% Cost-of-Capital rate, a 20-year starting point for extrapolation of the euro risk-free rate, and a 20% convergence speed parameter. Member States must adopt the implementing laws by 1 January 2025 and apply them from 1 January 2026.

Committee position. The rapporteur proposes to amend the Commission proposal by raising proportionality thresholds, simplifying the low-risk profile regime, deleting the climate scenario analysis, the split of the solvency and financial condition report, the audit requirement and most macro-prudential provisions, and making cross-border collaboration platforms mandatory.

Key points

  1. Raises the annual gross written premium threshold for exclusion from the directive from EUR 15 000 000 to EUR 25 000 000, and the technical provisions thresholds to EUR 65 000 000 and EUR 65 000 000.
  2. Defines 'low-risk profile undertaking' to include captive insurance and reinsurance undertakings, which are automatically classified as low-risk profile.
  3. Sets a new horizontal definition of 'significant cross-border activities' as activities exceeding 25% of annual gross written premium, replacing the definitions in Articles 33a and 159a.
  4. Deletes the Commission's proposal to include institutions for occupational retirement provision in the definition of 'regulated undertaking'.
  5. Simplifies the criteria for low-risk profile undertakings: cross-border business limit raised from 5% to 25%, non-traditional investments limit raised from 20% to 30%, and market-share criteria based on gross technical provisions or gross written premiums.
  6. Adds a condition that the Solvency Capital Requirement is complied with and no capital add-on has been set, and deletes the exclusion of undertakings using internal models from low-risk profile status.
  7. Deletes the proposed climate change scenario analysis and the related recitals, and deletes the proposed audit requirement for the solvency and financial condition report.
  8. Deletes the proposed split of the solvency and financial condition report into two parts and the related disclosure provisions.
  9. Deletes most proposed macro-prudential provisions, including the chapter title 'Macroprudential tools', Article 144c, and the group liquidity risk management chapter.
  10. Makes collaboration platforms mandatory for cross-border activities and requires EIOPA to assist in reaching agreement and to initiate on-site inspections in case of disagreement.
  11. Sets the Cost-of-Capital rate at 4%, the starting point for extrapolation of the euro risk-free rate at 20 years, and the convergence speed parameter at 20%.
  12. Requires Member States to adopt implementing laws by 1 January 2025 and apply them from 1 January 2026.

Who is affected

  • Small insurance and reinsurance undertakings, which benefit from higher thresholds for exclusion from the directive.
  • Captive insurance and reinsurance undertakings, which are automatically classified as low-risk profile.
  • Insurance and reinsurance undertakings with cross-border activities, which face a new definition of significant cross-border activities and mandatory collaboration platforms.
  • Institutions for occupational retirement provision, which are excluded from the definition of regulated undertaking.
  • Member States, which must transpose the directive by 1 January 2025 and apply it from 1 January 2026.

Figures and deadlines

  • EUR 25 000 000: annual gross written premium threshold for exclusion from the directive.
  • EUR 65 000 000: technical provisions threshold for exclusion from the directive.
  • 25%: threshold for significant cross-border activities.
  • 30%: maximum share of non-traditional investments for low-risk profile undertakings.
  • 4%: Cost-of-Capital rate for the risk margin.
  • 20 years: starting point for extrapolation of the euro risk-free interest rate.
  • 20%: convergence speed parameter for the risk-free rate extrapolation.
  • 1 January 2025 and 1 January 2026: deadlines for Member States to adopt and apply implementing measures.

Legal basis: Article 294(2) and Article 53(1), Article 62 and Article 114 of the Treaty on the Functioning of the European Union.