On 18 May 2018, EIOPA published an opinion on the solvency position of insurance and reinsurance undertakings in light of the withdrawal of the UK from the EU.
The opinion calls upon national supervisory authorities to ensure that the insurance and reinsurance undertakings under their supervision identify, measure, monitor, manage and report the risks arising from the UK becoming a third country and include them in their own risk and solvency assessment. National supervisory authorities should also assess the risks affecting their national markets and, where necessary, take preventive supervisory actions.
EIOPA says that the withdrawal of the UK from the EU may have an impact on the solvency position of insurers. Technical provisions, own funds and capital requirements of insurance and reinsurance undertakings in Member States other than the UK can change when the UK becomes a third country due to changed regulatory requirements. In particular, the Solvency II Directive distinguishes between activities in and outside of the EU.
The opinion sets out 14 areas where the determination of the solvency position of insurers will change. The areas include the risk-mitigating impact of derivatives, the recognition of ratings from UK rating agencies and the regulatory treatment of credit risk exposures situated in the UK. Not all of the changes may affect each insurance company.
EIOPA, together with national supervisory authorities, will monitor the risks to the solvency position of insurance and reinsurance undertakings.