The European Insurance & Occupational Pensions Authority (EIOPA) has published a short Opinion on the application of a combination of methods to the group solvency calculation under Solvency II.
This calculation can be carried out using (a) the consolidation method; (b) the deduction and aggregation method; or (c) a combination of both (with supervisory approval). The Opinion focuses on the combination approach, especially when the group includes an undertaking in a Solvency II equivalent third-country. It covers (for example):
- The determination of the basis for tier limits used in the assessment of the own funds’ eligibility;
- The factors to be taken into account by supervisors when they decide whether to allow a group to use a combination of methods; and
- The law of unintended consequences.
EIOPA will monitor the development of the issues addressed in the Opinion, so another Opinion, or an update might follow.