[ParlTrack]

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 are calibration 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

Raffaele FITTO

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

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

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. For the purposes of this paragraph, ‘government bonds’ means exposures to central governments and central banks.

2022/08/01
Committee: ECON

Raffaele FITTO

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 RCeu for the risk correction for the currency cu, shall be calculated as follows: for government bonds: RCgov_eu = max(PD + CoD, 30% * LTAS) (b) for corporate bonds: RCcorp_eu = 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

Raffaele FITTO

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

Raffaele FITTO

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

Raffaele FITTO

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; (e) 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. (f) 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; (g) 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; (h) 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. (i) 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 1shall 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

Raffaele FITTO

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 inline with interest rates dynamics, the explicit floor identified should be increasing and term-dependent.

2022/08/01
Committee: ECON

Raffaele FITTO

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

8 Amendments of Raffaele FITTO related to 2021/0295(COD)

ParlTrack - 2011-2024