EIOPA consults on risk-free interest rate: EIOPA is consulting on the risk-free interest rate structure it has to publish to enable calculations under Solvency 2. The proposed default approach is to derive the risk-free interest rate from the rates at which two parties are prepared to swap fixed and floating interest rate obligations. Where this information is not available or reliable, the risk-free interest rate would be based on the government bond rates of the country.  The risk-free interest rate would be published for different time periods and currencies, adjusted to eliminate swaps' counterparty risk element, extrapolate future rates, factor in volatility and identify what part of the spread above the risk-free interest rate is not faced by those institutions that hold assets to maturity. The consultation is open until 21 November. (Source: Consultation Paper on Regarding the Risk-Free Interest Rate)

EIOPA finalises Solvency 2 ITS: EIOPA has submitted to the Commission its draft final implementing technical standards (ITS) that harmonise the information that insurers and reinsurers will have to report to their supervisors as part of the approval process of their prudential frameworks. The ITS cover reporting on the use of:

  • internal models, also those used at group level which require joint supervisory approval;
  • matching adjustment;
  • ancillary own funds;
  • undertaking-specific parameters; and
  • special purpose vehicles.

The Commission has three months to adopt these ITS, after which they will be published without further scrutiny. (Source: Draft ITS on the Supervisory Approval Processes for Solvency 2)

EIOPA consults on product governance: EIOPA is consulting on guidelines for product oversight and governance arrangements by insurers. The guidelines cover:

  • establishment of product governance and oversight arrangements;
  • role of the manufacturer's administrative, management or supervisory body;
  • review of product governance and oversight arrangements;
  • management of conflict of interest in product design;
  • target market;
  • knowledge and ability of staff involved in the design of products;
  • product testing;
  • product monitoring;
  • remedial action;
  • distribution channels; and
  • outsourcing product design.

EIOPA asks for comment by 23 January 2015. (Source: EIOPA Consults on Product Governance)