On 8 March, Insurance Europe published responses to a EIOPA discussion paper on the upcoming review of Solvency II, in which they expressed the following concerns:

» Loss absorbing capacity of deferred taxes: Insurance Europe does not support a default approach whereby the loss absorbing capacity of deferred tax would be capped at the level of net deferred tax pre-shock.

» Risk margin: they do not consider the current method and assumptions for risk margin to be appropriate as they lead to excessive levels of risk margin and volatility, particularly for long-term insurance business in the current low interest rate environment.

» Look-through approach: they believe that this approach should be extended to investment related undertakings that are used as investment vehicles by insurers to facilitate the better alignment with underlying risks.

» Treatment of guarantees, exposures guaranteed by a third party: Insurance Europe strongly supports a better recognition of the risk-mitigating effect of guarantees in Solvency II as it will reflect the economic reality for insurers' risk exposure.

Insurance Europe's press release is here.

Insurance Europe's responses are here.