EIOPA published a new opinion in which it raises its concerns regarding inconsistency between EU Member States when considering and approving applications by insurers to use their own internal models to calculate new capital requirements. EIOPA identified areas where national regulators could potentially jeopardise a new EU-wide regulatory regime without a harmonised internal model approval process and recommended the preferred options in dealing with (i) risks related to sovereign exposures; (ii) risk-free interest rates; (iii) presumption of third country equivalence; and (iv) use of comparative studies.
EIOPA is concerned that different approaches to internal modelling could affect convergence and ultimately lead to an imbalance as the internal model is one area that is particularly prone to inconsistent approaches. EIOPA intends to continue monitoring the approach taken to improve internal models and will engage with national competent authorities to understand what actions have been taken following EIOPA’s opinion and will consider what further measures are required to ensure consistent approaches. Under EIOPA’s mandate it has the power to respond to instances of incorrect or insufficient application of EU law and can issue recommendations and decisions to offending Member States.
EIOPA’s complete opinion can be found here: https://eiopa.europa.eu/Publications/Opinions/EIOPA-BoS-15-083%20Opinion%20on%20IMs%20%28April%202015%29.pdf.