BETA

16 Amendments of Fabio Massimo CASTALDO related to 2021/0295(COD)

Fabio Massimo CASTALDO

Proposal for a directive
Recital 3 a (new)

(3 a) The need to properly reflect extremely low and negative interest rates in the insurance regulation has arisen due to what has been witnessed in recent years on the markets; this has to be achieved via a recalibration of the Interest Rate Risk sub-module to reflect the existence of a negative yield environment. At the same time, the methodology to be used shall not result in unrealistically large decreases in the liquid part of the curve; this can be avoided by foreseeing an explicit floor to represent a lower bound of interest rates. In line with interest rates dynamics, the floor should not be flat but term-dependent.

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Recital 40

(40) For the purposes of calculating their own funds under Regulation (EU) No 575/2013 of the European Parliament and of the Council23 , institutions which belong to financial conglomerates that are subject to Directive 2002/87/EC of the European Parliament and of the Council24 may be permitted not to deduct their significant investments in insurance or reinsurance undertakings, provided that certain criteria are met. There is a need to ensure that prudential rules applicable to insurance or reinsurance undertakings and credit institutions allow for an appropriate level- playing field between banking-led and insurance-led financial groups. Therefore, insurance or reinsurance undertakings should also be permitted not to deduct from their eligible own funds participations in credit and financial institutions, subject to similar conditions and to apply a capital requirement factor based on the market risk module, calculated in accordance with Directive 2009/138/EC, to the participations in credit and financial institutions. In particular, either group supervision in accordance with Directive 2009/138/EC or supplementary supervision in accordance with Directive 2002/87/EC should apply to a group encompassing both the insurance or reinsurance undertaking and the related institution. In addition, the institution should be an equity investment of strategic nature for the insurance or reinsurance undertaking and supervisory authorities should be satisfied as to the level of integrated management, risk management and internal controls regarding the entities in the scope of group supervision or supplementary supervision. __________________ 23 Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1). 24 Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (OJ L 35, 11.2.2003, p. 1).

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Recital 64

(64) There is a lack of clarity regarding the types of undertakings for which Method 2, namely a deduction and aggregation method as defined in Article 233 of Directive 2009/138/EC, may be applied when calculating group solvency, which is detrimental to the level-playing field in the Union and in third countries. Therefore, it should be clearly specified which undertakings may be included in the group solvency calculation through Method 2. Such method should only apply to insurance and reinsurance undertakings, third-country insurance and reinsurance undertakings, undertakings belonging to other financial sectors, mixed financial holding companies, insurance holding companies, and other parent undertakings the main business of which is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance or reinsurance undertakings, or third-country insurance or reinsurance undertakings.

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Recital 72

(72) There is no legal provision specifying how to calculate group solvency when a combination of Method 1 and Method 2 is used. This leads to inconsistent practices and uncertainties, in particular in relation to the way of calculating the contribution to the group Solvency Capital Requirement of insurance and reinsurance undertakings included through Method 2. Therefore, it should be clarified how group solvency is to be calculated when a combination of methods is used. In order to avoid material increases in capital requirements, it should be clarified that, for the purpose of calculating the consolidated group Solvency Capital Requirement, no equity risk capital charge is to be applied to such holdings. For the same reason, and because currency risk c~~harge should only be applied to the value of~~annot lead to a breach in those hsol~~dings that is in excess of~~vency capital requirements as long as the Ssol~~vency Capital Requirements of those related undertakings~~o undertakings are well capitalized, currency risk of those related undertakings should be assessed and managed in pillar II. Participating insurance or reinsurance undertakings should be allowed to take into account diversification between that currency risks and other risks underlying the calculation of the consolidated group Solvency Capital Requirement.

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Recital 78

(78) Achieving the environmental and climate ambitions of the Green Deal requires the channelling of large amounts of investments from the private sector, including from insurance and reinsurance companies, towards sustainable investments. The provisions of Directive 2009/138/EC on the capital requirements should not impede sustainable investments by insurance and reinsurance undertakings but should reflect the full risk of investments in environmentally harmful activities. While there is not sufficient evidence at this stage on risk differentials between environmentally or socially harmful and other investments, such evidence may become available over the next years. I~~n order to ensure an appropriate assessment of the relevant evidence, EIOPA should~~f and once sufficiently meaningful, high-quality, comparable scientific data becomes available, EIOPA should be given a mandate to monitor and report ~~by 2023 on the~~on the potential evidence on the risk profile of environmentally or socially harmful investments. ~~Where~~If appropriate, EIOPA’s report should advise on changes to Directive 2009/138/EC, ands to ~~the delegated and implementing acts adopted pursuant to that Directive~~whether the SCR remains prudent for environmentally or socially harmful investments. EIOPA may also inquire whether it would be appropriate that certain environmental risks, other than climate change-related, should be taken into account and how. For instance, if evidence so suggests, EIOPA could analyse the need for extending scenario analyses as introduced by this Directive in the context of climate change- related risks to other environmental risks.

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 38 – point c

Directive 2009/138/EC
Article 77d – paragraph 2 a (new) and 2 b (new)

2a. For each currency and each country, the spread referred to in paragraph (2) shall be equal to the following: 𝑺 = 𝒘𝒈𝒐𝒗 ∗ 𝒎𝒂𝒙 (𝑺𝒈𝒐𝒗, 𝟎) + 𝒘𝒄𝒐𝒓𝒑 ∗ 𝒎𝒂𝒙(𝑺𝒄𝒐𝒓𝒑, 𝟎) where: (a) 𝒘𝒈𝒐𝒗 denotes the ratio of the value of government bonds included in the reference portfolio of assets for that currency or country and the value of all the assets included in that reference portfolio; (b) 𝑺𝒈𝒐𝒗, denotes the average currency spread on government bonds included in the reference portfolio of assets for that currency or country; (c) 𝒘𝒄𝒐𝒓𝒑 denotes the ratio of the value of bonds other than government bonds, loans and securitisations included in the reference portfolio of assets for that currency or country and the value of all the assets included in that reference portfolio; (d) 𝑺𝒄𝒐𝒓𝒑 denotes the average currency spread on bonds other than government bonds, loans and securitisations included in the reference portfolio of assets for that currency or country. 2b. For the purposes of paragraph 2a (new), ‘government bonds’ means exposures to central governments and central banks.

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 38 – point c

Directive 2009/138/EC
Article 77d – paragraph 3 a (new)

3a. The portion of the spread that is attributable to a realistic assessment of expected losses, unexpected credit risk or any other risk shall be calculated in the same manner as the fundamental spread referred to in Article 77c(2). More in detail, the amount resulting from this assessment, denoted 𝑹𝑪𝒄𝒖 for the risk correction for the currency cu, shall be calculated as follows: for government bonds: 𝑹𝑪𝒈𝒐𝒗_𝒄𝒖 = 𝒎𝒂𝒙(𝑷𝑫 + 𝑪𝒐𝑫, 𝟑𝟎% ∗ 𝑳𝑻𝑨𝑺) (b) for corporate bonds: 𝑹𝑪𝒄𝒐𝒓𝒑_𝒄𝒖 = 𝒎𝒂𝒙(𝑷𝑫 + 𝑪𝒐𝑫, 𝟑𝟓% ∗ 𝑳𝑻𝑨𝑺) where: (i) 𝑷𝑫 is the credit spread corresponding to the probability of default on the assets; (ii) 𝑪𝒐𝑫 is the credit spread corresponding to the expected loss resulting from downgrading of the assets; (iii) LTAS is the long-term average of the spread over the risk-free interest rate of assets of the same duration, credit quality and asset class.

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 38 – point c

Directive 2009/138/EC
Article 77d – paragraph 4 – subparagraph 5

The country adjustment factor referred to in point (e) shall be calculated as follows: Where 𝑹𝑺𝑪𝒄𝒐 for the country co as referred to in the first subparagraph, point (d), multiplied by the percentage of investments in debt instruments relative to total assets held by insurance and reinsurance undertakings authorised in country co.∗ 𝑹𝑪𝑺𝒄𝒐 ― 0.6% 𝑹𝑪𝑺𝒄𝒐 ― 0.6% 𝜔𝑐𝑜 = 𝑚𝑎𝑥(𝑚𝑖𝑛( ;1);0) 𝜔𝑐𝑜 = 𝑚𝑎𝑥(𝑚𝑖𝑛( ;1);0) 0.3% 0.3% ∗ is the risk-corrected spread

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 40 – point a – point iii

Directive 2009/138/EC
Article 86 – paragraph 1 – point i – point iii

(iii) for each relevant asset class, the percentage of the spread that represents the portion attributable to a realistic assessment of expected losses or unexpected credit or other risks of the assets as referred to in Article 77d(3);deleted

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 41 – point a

Directive 2009/138/EC
Article 92 – paragraph 1a – subparagraph 1

1a. The Commission shall adopt delegated acts in accordance with Article 301a specifying the treatment of participations, within the meaning of Article 212(2), third subparagraph, in financial and credit institutions with respect to the determination of own funds, including: (i) approaches to deductions from the basic own funds of an insurance or reinsurance undertaking of material participations in credit and financial institutions; (ii) the market risk module to be applied by insurance and reinsurance undertakings and groups to the participations in credit and financial institutions pursuant to this Article.

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 43 a (new)

Directive 2009/138/EC
Article 105 a (new)

(43a) the following Article is inserted: ‘Article 105a Long-term equity investments 1. A sub-set of equity investments may be treated as long-term equity investments if the insurance or reinsurance undertaking demonstrates, to the satisfaction of the supervisory authority, that all of the following conditions are met: (a) the sub-set of equity investments is clearly identified; (b) the sub-set of equity investment is included within a portfolio of assets which is assigned to cover the best estimate of a portfolio of insurance or reinsurance obligations corresponding to one or several clearly identified businesses, and the undertaking maintains that assignment; (c) the assigned portfolio of assets referred to in point (b) are identified and managed separately from the other activities of the undertaking; (d) a policy for long term investment management is set up for each long-term equity portfolio and reflects undertaking’s commitment to hold the global exposure to equity in the sub-set of equity investment for a period that exceeds 5 years on average. The AMSB of the undertaking has signed off these investment management policies and these policies are frequently reviewed against the actual management of the portfolios; (e) the sub-set of equity investments consists only of equities that are listed in countries that are member of the OECD or of unlisted equities of companies that have their head offices in countries that are member of the OECD; (f) where undertakings can demonstrate that either particular homogeneous risk groups of the life insurance and reinsurance liabilities belongs to categories I or II as defined for the purpose of the calculation of the VA and the Macaulay duration of the liabilities in this HRG exceeds 5 years or a sufficient liquidity buffer is in place for the portfolio of non-life insurance and reinsurance liabilities and the assigned portfolio of assets; (g) the risk management, asset-liability management and investment policies of the insurance or reinsurance undertaking reflects the undertaking's intention to hold the sub-set of equity investments for a period that is compatible with the requirement of point (e) and its ability to meet the requirement of point (g). Those elements are reported in the ORSA of the undertakings; (h) the sub-set of equity investments shall be properly diversified in such a way as to avoid excessive reliance on any particular issuer or group of undertakings and excessive accumulation of risk in the portfolio as a whole. 2. The proportion of equity backing life technical provisions that is assigned to the long-term equity investment category does not exceed the proportion of life technical provisions compliant with the criteria specified in paragraph 1 on the total life technical provisions of the insurance or reinsurance undertaking. 3. Where equities are held within collective investment undertakings or within alternative investment funds the conditions laid down in paragraph 1 maybe assessed at the level of the funds and not of the underlying assets held within those funds. 4. Insurance or reinsurance undertakings that treat a sub-set of equity investments as long-term equity investments in accordance with paragraph 1 shall not revert to an approach that does not include long-term equity investments. Where an insurance or reinsurance undertaking that treats a sub-set of equity investments as long-term equity investments is no longer able to comply with the conditions set out in paragraph 1, it shall immediately inform the supervisory authority and shall cease to apply Articles 169(1)(b), (2)(b), (3)(b) and (4)(b) to any of its equity investments for a period of 36 months. 5. Participations shall be excluded from the sub-set of equity investments. In addition to the proposed criteria EIOPA advises that, in cases where the allocation of equity to LTE has a material impact on the overall SCR of the undertaking, enhanced reporting requirements should apply (e.g. through the RSR) in addition to the regular reporting through ORSA established under criterion 1(h). Such requirements should focus on the assessment of the undertaking’s ability to effectively hold equity in the long term from a risk management perspective, as well as a sensitivity analysis of the impact of LTE on its solvency position. The capital requirement for long-term equity investments shall be equal to the loss in the basic own funds that would result from an instantaneous decrease equal to 22% in the value of investments that are treated as long-term equity.’

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 46 – point b

Directive 2009/138/EC
Article 111 – paragraph 1 – subparagraph 2 a (new)

For the purpose of the first subparagraph, point (c), the methods, assumptions and standard parameters for the interest rate risk sub-module referred to in Article 105(5)(a) shall reflect the risk that low or negative interest rates may fall below their current level. By way of derogation from the previous sentence, the calculation of the interest rate risk sub-module shall not be required to take into account the risk of interest rates falling to levels below a negative floor where a negative floor can be determined such that the likelihood of interest rates across relevant currencies and across maturities not being at all times above the negative floor is sufficiently small. Having this in mind and in line with interest rates dynamics, the explicit floor identified should be increasing and term-dependent.

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 48

Directive 2009/138/EC
Article 122 – paragraph 5

(48) in Article 122, the following paragraph 5 is added: ‘ 5. insurance and reinsurance undertakings to take into account the effect of credit spread movements on the volatility adjustment calculated in accordance with Article 77d in their internal model, only where: (a) the effect of credit spread movements on the volatility adjustment for the euro does not take into account a possible increase of the volatility adjustment by a macro volatility adjustment pursuant to Article 77d(4); (b) is not lower than any of the following: (i) Requirement calculated as the Solvency Capital Requirement, except that the effect of credit spread movements on the volatility adjustment is taken into account in accordance with the methodology used by EIOPA for the purposes of the publication of technical information pursuant to Article 77e(1), point (c); (ii) Requirement calculated in accordance with (i), except that the representative portfolio for a currency referred to in Article 77d(2), second subparagraph, is determined on the basis of the assets in which the insurance and reinsurance undertaking is investing instead of the assets of all insurance or reinsurance undertakings with insurance or reinsurance obligations denominated in that currency. For the purpose of the first subparagraph, point (b), the determination of the representative portfolio for a given currency shall be based on the undertaking’s assets dominated in that currency and used to cover the best estimate for insurance and reinsurance obligations denominated in that currency.; ’deleted Member States may allow the method to take into account the Solvency Capital Requirement a notional Solvency Capital a notional Solvency Capital

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 54

Directive 2009/138/EC
Article 144b – paragraph 3 – subparagraph 1

3. Member States shall ensure that supervisory authorities have the power to temporarily suspend redemption rights of policyholders on life insurance policies of undertakings facing significant liquidity risks that may cause a threat to the protection of policyholders or to the stability, in relation to undertakings facing extreme liquidity risks and with an imminent risk of non-compliance with their Solvency Capital Requirement that may cause a severe and imminent threat to the protection of policyholders or to the stability of the financial system, supervisory authorities have the power to temporarily: (a) restrict or suspend dividend distributions to shareholders and other subordinated creditors; (b) restrict or suspend other payments to shareholders and other subordinated creditors; (c) restrict or suspend share buy-backs and repayment or redemption of own fund items; (d) restrict or suspend bonuses or other variable remuneration; (e) suspend redemption rights of thlife fin~~ancial system.~~ surance policy holders.

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 70

Directive 2009/138/EC
Article 228 – paragraph 1 – introductory part

1. Irrespective of the method used in accordance with Article 220 of this Directive, for the purpose of calculating the group solvency, when participations in related undertakings from other financial sectors represent 20 % or more of the voting rights or capital of the undertaking, the participating insurance or reinsurance undertaking shall take into account the contribution to the group eligible own funds and to the group Solvency Capital Requirement of the following undertakings:

2022/08/01
Committee: ECON

Fabio Massimo CASTALDO

Proposal for a directive
Article 1 – paragraph 1 – point 70

Directive 2009/138/EC
Article 228 – paragraph 5 a (new)

5a. For participations in related undertakings from other financial sectors different to those referred to in paragraph 1, participating undertakings shall apply a capital requirement according to a market risk module approach.

2022/08/01
Committee: ECON