EIOPA publishes opinion on non-life cross-border insurance business of a long-term nature

On 22 December 2018, the European Insurance and Occupational Pensions Authority (EIOPA) published an opinion on non-life cross-border insurance business of a long-term nature and its supervision. The opinion is addressed to national competent authorities (NCAs) and outlines EIOPA's expectations on the calculation of technical provisions and the governance for cross-border business.

The objective of the opinion is to ensure the appropriate application of the legal requirements and consistent supervisory practices with regards to the calculation of technical provisions and quantitative information on non-life long-term business with distinctive features or a high degree of local specificities.

EIOPA says that long-term non-life insurance business operated cross-borders is typically more uncertain than the majority of non-life business. Such business requires both the knowledge of the local market specificities and the actuarial skills for the calculation of the technical provisions and the management of the activity. EIOPA says that experience has shown that these activities attract players that do not possess the required knowledge and skills, potentially leading to localised underpricing and under-reserving to the detriment of policyholders.

The opinion highlights the need for all parties involved to be aware of the local specificities when cross-border business is carried-out and outlines EIOPA’s expectations to undertakings and recommendations to the NCAs on three aspects:

• expectations on technical provisions with the focus on the best estimate calculation;
• expectations on governance, namely on the key functions and the administrative, management or supervisory body;
• recommendations on the supervisory review process and the collaboration between home and host NCAs.

The opinion also contains annexes which provide examples and quantitative information on technical provisions for specific non-life long-term insurance obligations. EIOPA may develop further annexes in the future to provide additional examples on technical provisions calculation and quantitative information on non-life long-term business with distinctive features or a high degree of local specificities.