CEIOPS seeks views on supervisory review

Papers released on the supervisory review process and reporting requirements, as well the valuation of structured credit products

FRANKFURT – The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has published a paper on the supervisory review process and undertakings’ reporting requirements under Solvency II.

The paper contains three separate sections focusing on details of the framework, which aims to converge the processes conducted by authorities in reviewing insurance and reinsurance undertakings, and through which they assess and monitor risk to policyholders. The paper also provides details of the information analysis carried out by supervisors to evaluate an undertaking’s strategies, processes and reporting procedures and its compliance with the laws, regulations and administrative provisions of the Framework Directive, and details on the quantitative and narrative reporting requirements that are envisaged for all undertakings under Solvency II.Comments are invited for this paper by November 12, 2008.

CEIOPS has also published a report on issues regarding the valuation of structured credit products, as requested by the Economic and Financial Affairs Council in its October 2007 roadmap on the financial market situation.The report focuses on how insurance undertakings are affected by issues related to the valuation of structured credit products, taking into account the latest developments in the Solvency II project and in International Financial Reporting Standards (IFRS).

It highlights the use and application of economic valuation in the context of the future Solvency II prudential framework for insurance undertakings; the main issues highlighted by the market turmoil in relation to the valuation of illiquid assets and the resulting concerns in terms of public disclosure; the specific issues posed by monoline insurance undertakings; and the lessons to be learned from the turmoil in the area of risk management, management of investments made by undertakings and governance.

CEIOPS is monitoring developments in this area and liaising on any follow-up measures with others, notably its fellow Level 3 committees, the Committee of European Securities Regulators and the Committee of European Banking Supervisors.

Click here for copies of the supervisory review process paper and here for the structured credit product valuation paper.