NEW ARCHITECTURE OF THE SUPERVISION OF THE
INSURANCE INDUSTRY IN THE EU
IS NOT ONLY A REACTION TO CRISIS
Júlia Čillíková
The insurance in EU on the threshold of the third millennium – May 2011
I. Role of the National bank of
Slovakia in the supervision of the
insurance market
The insurance in EU on the threshold of the third millennium – May 2011
Júlia Čillíková
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NBS organizational structure
The insurance in EU on the threshold of the third millennium – May 2011
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Brief description
 Rulemaking activities (regulation department)
 generally binding regulations of the NBS - decrees, methodology
 Licensing & enforcement (supervision department)
 Supervision – Microprudential (supervision department)
 Off-site supervision
 On-site supervision
 Supervision – Macroprudential (financial analyses department)
 Analyses– analyses for internal and external users, for
supervision purposes and monitoring of insurance market
stability
 Complaints handling
 Data collection, processing, storage and disclosure of
information (statistics department)
The insurance in EU on the threshold of the third millennium – May 2011
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Macroprudential analyses
Monitoring of risks – macro-stress
testing
Impact of stress testing on insurance sector
(profit & loss as a percentage of total assets)
5%
0%
-5%
-10%
-15%
XII.11
IX.11
VI.11
III.11
XII.10
IX.10
VI.10
III.10
XII.09
-20%
Insurers (excluding unit-linked insurance) - baseline scenario
Insurers (excluding unit-linked insurance) - Financial Market Uncertainty
Unit-linked insurance - baseline scenario
Unit-linked insurance - Financial Market Uncertainty
 Focus on early identification
of risks and adverse trends
in the insurance industry
and the whole financial
sector
 Systemic view
 Macroprudential analyses
on quarterly and half yearly
basis
 Monitoring of trends
 Identification of risks and
threats
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II. Lesson learned from financial
crises
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Lessons learned
 Macroprudential supervision needed
 Important to identify systemically important financial
institutions (SIFIs)
 Microprudential supervision
 More focus on risk – Solvency II on right track
 Insurance is different business model as banks
 Less important from a systemic point of view
 Lower exposition to liquidity risk
 More connection to real economy – policyholder behavior
 Regulation - no zero failure environment
The insurance in EU on the threshold of the third millennium – May 2011
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New architecture of the European
financial supervision
The insurance in EU on the threshold of the third millennium – May 2011
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III. Solvency II
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Highlighted issues

Fifth quantitative impact study showed that for all tested insurance
undertakings own funds were higher than required capital (SCR)
 However, further work is needed
 Open issues: Expected profits included in future premium (EPIFP),
Contract Boundaries, CAT risk, too complex methodology, etc.




More focus on system of governance and disclosure (pillar 2 & 3)
Huge administrative work connected to transposition of level 1 directive to
Slovak act on Insurance
Challenge for supervisors (harmonized supervisory tools, increased EU
dimension, well prepared stuff, new IT tools, etc.)
Level 1 – Omnibus II
 Pros: Postponed implementation (two months)
 Cons: Postponed work on Delegated Acts, Transitional provisions
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Project for implementation of the
Solvency II in the Slovak republic








Analysis of the preparedness of the insurance undertakings for the
Solvency II (published: November 2010)
Analytical data of the fifth quantitative impact study (published: March
2011)
Analysis of the impact of the Solvency II on the National bank of
Slovakia (published: April 2011)
Report on the fifth quantitative impact study (will be soon available)
Analysis of the legislation framework after the implementation of
the Solvency II (will be soon available)
Ongoing work on the Level II, Level III (delegated acts and
guidelines) and Omnibus II
Transposition of the Solvency II to Slovak act on insurance
Other activities (discussions with market, presentations, etc.)
The insurance in EU on the threshold of the third millennium – May 2011
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Solvency II project- Timetable
Ongoing work on Level 1, Level 2 a Level 3
Transposition of the S II to Slovak act on insurance
Analyses of the preparedness of the Slovak republic
Analysis of the legislation framework
QIS 5
Impact of the S II on the NBS
Prepar. of the market
March
April
May
June
July
Presentations
.
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Issues related to Solvency II
Review of the IORP directive
April 2011 – Call for advice from EC on review of IORP Directive (deadline:
December 2011)
Deliverable: advice on principles for Level 1 IORP II Directive
Reasons for review:
 Remove regulatory obstacles for cross-border operation of IORPS
 Implement risk-based supervision
 Modernize prudential regulation for DC IORPs
Allocation of work:
Issue
Task force leader
Scope & cross-border aspects
BE
Quantitative requirements (pillar 1)
PT
Governance (pillar 2)
SK
Information to members (pillar 3)
IT
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IV. Consumer protection
The insurance in EU on the threshold of the third millennium – May 2011
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Current workstreams
 Insurance Guarantee Schemes
 NBS is against the IGS
• Main arguments: moral hazard, not suitable for too
concentrated insurance market such as Slovak republic
 Highlighted issues:
• home vs. host, ex post vs. ex ante, full coverage vs. focus on
life or non-live, etc.
 Packaged retail investment products (PRIPs)
 November 2010 – January 2011: Consultation on PRIPs
• Scope:
 “with-profits” – grey area
 Pensions – out (IORP review)
• Pre-contractual disclosures: KIID (UCITS)
• Sales: MiFID
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Current workstreams
 Insurance mediation Directive
Conflicts of interest
Disclosure of remuneration
Review of information requirements
Classical Directive structure of the IMD (If the revised IMD
provisions in this area are set at a maximum level this could
result in a lower degree of protection if this was below the
level of protection provided currently by individual Member
States.)
 Reducing the administrative burden
 Increased efficiency in cross-border business and new
notification provisions for IMD2
 IMD exclusion for reinsurance transactions




The insurance in EU on the threshold of the third millennium – May 2011
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Current workstreams
 The role of the EIOPA
 Article 9, EIOPA Regulation No. 1094/2010 of the
European Parliament and of the Council - Tasks
related to consumer protection and
financial activities
 The role of the National bank of Slovakia
 Possible solution - Twin peaks model ???
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V.
Discussion
The insurance in EU on the threshold of the third millennium – May 2011
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THANK YOU
FOR YOUR ATTENTION
Júlia Čillíková
Director of the Regulatory
and Financial Analysis Department
Tel: 00421 2 5787 3300
Fax: 00421 2 5787 1118
E-mail: julia.cillikova@nbs.sk
National Bank of Slovakia
Imricha Karvaša 1
813 25 Bratislava 1
Slovak Republic
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