Solvency ii News June 2012

Solvency ii Association
1200 G Street NW Suite 800 Washington, DC 20005-6705 USA
Tel: 202-449-9750 www.solvency-ii-association.com
Dear member,
Wecontinue to seethat SolvencyII is “futurerule” …
www.solvency-ii-association.com

Preparefor the OmnibusII Directive
TheSolvencyII Framework Directive(2009) on the financial positionof
insuranceundertakingshashad to be adaptedin responseto:
new architecturefor itsimplementingmeasuresintroduced in the
LisbonTreaty(2009)

new financial supervisionmeasuresintroduced in Regulation
1094/2010establishingthe European Insuranceand Occupational
PensionsAuthority.
Thesechangesare implemented through the“OmnibusII
directive”, currentlyin negotiationsbetweenParliament and Council.
Implementing Measures
TheFramework Directiveisprinciples-based, and thedetailed rulesof
theSolvencyII regime will be contained in ImplementingMeasures
adopted by the Commission, and coveringabout 40 important areasin
theFramework Directive.
TheCommission will proposeimplementingmeasuresafter OmnibusII
directiveentersintoforce.
Technical standardsand guidelines
Technical standards:
- concern purelytechnical matters(nostrategic decisionsor policy
choices)
- requirethe expertiseof supervisoryexperts
- are adopted by theCommission based on draftssubmittedbythe
European Insuranceand Occupational PensionsAuthority (EIOPA).
Regulatory Technical Standards(RTS)
Theseare standardsfor the consistent harmonisation of rulesin EU
legislativeacts.
Implementing Technical Standards(ITS)
Theseare standardsfor the uniform applicationof legallybindingEU
acts.

Areas tobe covered, asproposed in theOmnibusII Directive, are:
uniform reportingtemplates
harmonisedtechnical input tothestandard formula
harmonisedproceduresand templatesfor cooperation
theexchangeof information betweensupervisoryauthorities
Guidelines
TheEuropean Insuranceand Occupational PensionsAuthority
(EIOPA) can issueguidelinesto supervisorsand undertakingswhich is
not legallybinding, but companiesor supervisorsnot complying will
havetoexplaintheir reasons.

Joint Consultation Paper on the proposed response to the
European Commission‟sCall for Advice on the Fundamental
Review of Financial Conglomerates Directive
14May 2012
TheJoint Committeeof the European SupervisoryAuthorities
(EBA, EIOPA and ESMA) is launchingtoday a three-month public
consultation on theproposed responsetothecall for technical advice
from theEuropean Commission on thefundamental review of the
Financial ConglomeratesDirective(“theFICOD“).
This consultation covers three broad areas where advice is sought by the
European Commission: the scope of application, the group wide internal
governance requirements and sanctions and supervisory empowerments
under theFICOD.
In its proposed response,the Joint Committeeissuesa seriesof
recommendationsfor the review of the FICOD, includingthe wideningof
thescope of supervision, addressingrequirementsand responsibilitiesto
a designated entitywithinthe financial conglomerateand theframework
of supervisory powersprovided by the FICOD.
Moreover, theJoint Committeewill be providing later thisyear, a
supervisorycontribution to the widerfundamental review of the
FICOD, whichis beingcarriedout by the European Commission.
EBA, EIOPAand ESMA‟sJoint Consultation Paper on its
proposed response to the European Commission‟s Call for
Advice on the Fundamental Review of the Financial
ConglomeratesDirective
London, Frankfurt, Paris, 14May 2012

1.Responding to thisConsultation
Thethree European SupervisoryAuthorities, the European Banking
Authority (EBA), the European Insuranceand Occupational Pensions
Authority (EIOPA) and theEuropean Securitiesand MarketsAuthority
(ESMA) invitecommentson all mattersin this.
Commentsare most helpful if they:
- Respond tothe question stated;
- Indicatethe specific questiontowhichthe comment relates;
- Contain a clear rationale;
- Provideevidencetosupport the viewsexpressed/ rationale
proposed;and
- Describeany alternativeregulatory choices
EBA/EIOPA/ESMA should consider.
2. Executive Summary
1.The Joint Committeeof theEuropean SupervisoryAuthorities‟Sub
Committeeon Financial Conglomerates(JCFC) received a Call for
Advice from the European Commission inApril 2011to look at the
(A)Scope of application, especiallythe inclusion of nonregulatedentities
(B) Internal governancerequirementsand sanctions,and
(C)Supervisoryempowerment of Directive2002/87/ EC on the
supplementarysupervisionof credit institutions,insuranceundertakings
and investment firmsin a financial conglomerate(FICOD).
This advice shall contributetothe European Commission‟sfundamental
review of the FICOD, followingthe short technical review,resultingin
Directive2011/ 89/ EU (hereafter FICOD12).
2.As a result of its analysis, theEBA, EIOPAand ESMA, hereinafterthe
ESAs, proposethe followinganswerstothequestionsrisenby the

Commission in itsfourth Call forAdvice (hereinafterCfA):
Question 1CfA: What shouldbetheperimeter of supervision, whena
financial conglomerate is supervised on a group widebasis?
3. Recommendation 1:
ThePerimeter of supervision should be enlargedtoensurea more
thorough group widesupervision and avoid possibleregulatory
arbitrage,by enhancingthegroupsof entitiesthat can be included in the
identificationof a financial conglomerate.
Accordinglythe ESAs suggest to allowfor a more consistent and broader
identificationof financial conglomeratesto modify thedefinition of
“financial sector” [accordingtoArticle 2(8) FICOD] and/ orthe
definitionof “regulatedentities” [accordingtoArticle 2 (4) FICOD].
Therefore, thedefinition of financial sector [Article 2 (8) FICOD] should
beenlarged to includeinsuranceancillaryservicesundertakingsand all
special purposevehicles/entitiestoenable a broader identificationof
financial conglomerates,and toenablethat the risksare appropriately
captured.
4. The ESAshave assessedwhetherInstitutionsfor occupational
retirement provision(IORPs) should be included aspart of a financial
conglomerate and are mindful of the national specificitiesof IORPs.
TheESAs welcometheviewsof the stakeholderson the following
options:
Option 1:
IncludeIORPswithin thedefinitionof “financial sector”, in a similar
manner tothe inclusion ofAlternative Investment Fund Managers
(AIFM) andAsset Management Companies(AMC) within FICOD, e.g.
by enlargingthe definition of a regulatedentityaccordingtoArticle2 (4)
FICOD and by amendingArticle 3 FICOD respectively.

Option 2:
Maintainthe statusquo; such that IORPs wouldnot beincludedwithin
group widesupervision at cross5sectorallevel, given that prudential risks
posed by IORPstofinancial conglomerateshave not been demonstrated.
However, thismight implythat relevant financial activitiesof IORPs
might not be taken intoaccount whenidentifying a financial
conglomerate and applying supplementarysupervision.
Mixedfinancial holdingcompanies(MFHCs), even if
unregulated, should be made subject tosupplementary supervision
or anytype of requirementsthat are proposed below.
Accordingly, MFHCsshould be includedtogether with regulated
entitiesasthe legal addresseeof supplementarysupervision.
Companiesundertaking solely industrial activities(with no financial
servicesactivityat all), such asindustrial conglomerates, should not be
subjecttodirect financial supervision asthesupervisoryfocusmight be
diverted from financial undertakings.
Mixedactivityholding companies (MAHCs) and mixed activity
insuranceholding companies(MAIHCs) should not become direct
addresseesof FICOD, but the supervisor should have theability to
accessrelevant informationfrom such MAHC and MAIHC withinits
supervisorytool kit.
The following supervisory tools are not mutually exclusive and the ESAs
welcome the views of the stakeholders in order to assess the implication
of this recommendation further.
7. Supervisorsshould be empowered:

Tool1–
Torequire the creationof an intermediatefinancial holdingwhichis
responsiblefor all the entities(or at least, all theregulated entities)
carrying out financial activitiessubject to supplementarysupervisionand
whichwill be the“addressee” for supervision.
Tool2–
Todesignateone single“point of entry” at the top of theunregulated
entitiesin place of a formal „commonchapeau‟of the financial entitiesin
thegroup.
This point of entry isnot a legal person, but a simple referencefor the
supervisors(e.g. a specificteam or division or a member of theBoard of
theparent entity).
Tool3–
Todesignatea specified regulatedentityaspoint of entry whichdoes
not necessarilyneed to be thetop entityof the entire financial
conglomerate.
This option has merit if the enforcement requirements and sanctioning
measures addressed to the top entity cannot be adequately enforced by
thesupervisors.
Question 2 CfA: Given your experienceand expertise,whichlegal entity
in a conglomerateshould be responsibleand qualify for compliancewith
group widerequirements,i.e. which legal entityshould be theresponsible
parent entity?
TheEuropean Commission should identify and define an ultimate
responsibleentity for the financial conglomerateaccordingtothe
followingminimum criteria: control, thedominant entityfrom the

market‟sperspective(market listedentity) and the ability tofulfil
specific dutiestowardsitssubsidiariesand itssupervisor.
Question 3 CfA: Given your supervisoryexperienceand expertise,which
requirementsshould be imposed on this qualified parent entityin the
context of group widesupervision?
This ultimateresponsibleentityshould be responsiblefor compliance
with group wide requirements.
TheEuropean Commission should explicitlyrequirethe ultimate
responsibleentitytohave a coordinating and directingrole over the
other entitiesof the conglomerate.
Moreover, some existingrequirementsfor regulatedentities and
requirementsthat can be derived from theESAs‟guidelineson Internal
Controlsshould alsobe applicablefor the top parent entity, whetherthe
regulated entityis a HoldingCompany or a Financial HoldingCompany
(FHC), InsuranceHolding Company (IH C) or a MFHC.
Question 4 CfA6: Given your supervisoryexperienceand
expertise, whichincentives(special benefitsor sanctions) would
make theenforcement of thegroup widerequirementsmore
credible?
10.Recommendation 6:
In order toensurethat the group widerequirementsare enforceable, the
European Commission should develop an enforcement regime towards
theultimateresponsibleentityand itssubsidiaries.
This would implya dual approach withenforcement powerstowardsthe
top entityfor group widerisksand towardsthe individual entitiesfor
their respectiveresponsibilities.

Correctivemeasuresshould be directed towardsthe entitythat is
responsiblefor the respectivebreach.
In any case, the supervisor should have a minimum set of
measures,consisting of informative and investigativemeasures,at
hand (seeRecommendation 3).
Supervisorsshouldbe able to administer sanctionmeasuresaddressed at
theMAHC or MAIHC, wherethisentitydoesnot to providethe
requested information.
Moreover, when(under Tool 1,Recommendation 3) an intermediate
financial holding companyhasbeen established, supervisorsshouldbe
ableto administersanction measuresat this intermediatefinancial
holding company.
Question 5 CfA: When reflectingupon this advice, wouldsupervisorsin
Europe need other or additional empowerment in their jurisdictions?
Whilst theFICOD provides theESAsand the supervisorswitha large
supervisorytool kit, supervisor‟sactual useof this tool kit should be
enhanced.
Further a minimum set of enforcement measuresthat national
supervisorsshouldhaveat their disposaltowardsthe group (Article 16
FICOD), should be achieved by theESAsdeveloping guidelinesor by
beingasked to develop bindingtechnicalstandardsfor a common
reporting scheme on risk concentrationsand intra group
transactions,(includingthepossibledevelopment of guidelinesfor
quantitativelimitsunderArticle 7 (3) and 8 (3) FICOD).

This alsoimpliescreatinga minimum set of sanctioningmeasuresthat
should be applied towardsthe group in caseof a breach of group wide
requirements.
In addition, theEuropean Commission should takeintoaccount sectoral
differencesthat may arise betweenCRD IV and SolvencyII.
Structuresof a financial conglomerate
Thefollowingexampleillustratesthat there are some group structures
that make it very difficult toidentify a financial conglomerate:
In some casesa subgroup within a largecomplex group (hereafter LCG)
qualifiesasa financial conglomerate. But after calculatingthethreshold
for the entire group (includingthe “real” industry) this group doesnot
fulfil the FICOD‟s40% threshold and, therefore,the wholegroup will not
besubject tosupplementarysupervision.
This situationmay alsobe a wayof avoidingsupplementarysupervision.

By settingup a chain of holdingcompanies with subsidiariesof “real”
industrythe 40%5threshold will not be fulfilledafter a certainpoint.
Currently, the supervisor isonlyallowedtoaddresstheregulatedentity
(e.g. in order to get information).
Theregulatedentityhas tocooperatewithitsparent entity(and is
responsiblefor the deliveredinformationto the supervisor) but has
(under company law) no powersto get necessaryinformation.
Thereforethepossibilityto addresssupervisoryissuesconcerning
information and sanctionstoholdingcompaniesshould be
strengthened.
In addition, there might be structureswhich are even more complex.
In thesecasesindustrial groupsmay have many different regulated
entitieswhichare not held by one parent entitybut arespread over the
group.

In thiscase,it is almost impossiblefor supervisorstoidentify the
holdingcompany whichmay qualify asMAHC or MAIHC.
Further, supervisorsmight not be abletosupervisethe group on a
groupwidelevel toavoid double gearing;but the regulatedentitiesof the
bankingand insurancesector are all supervisedon a sololevel.
Thepotential negativeeffects(arisingfrom intragroup transactionsor
risk concentrations) are scarcelyvisible.
This may lead tospillovereffects(either from theindustrial part to the
financial part or vice versa).

Consequently, supplementarysupervision on a group widelevel would
help (if this group doesnot qualify asa financial conglomerateaccording
toArticle 3FICOD).
Thus, introducinga responsibleentitywithinthe group asan addressee
for supervisoryactionswouldlead to more clarityfrom a supervisory
point of view.
Tolearn more:
http:/ / www.eba.europa.eu/ cebs/media/ Publications/ Consultation%20
Papers/2012/JC%2001/JC-CP-2012-01--ESAs-Joint-CP----EC-call-for-
advice-on-fundamental-FICOD-review-.pdf

The fit and proper requirements…
Tribunal upholds FSAdecision to ban and fine former UBS
advisers£1.3m for not being fit and proper in relation to an
unauthorised trading scheme
21May 2012
TheUpper Tribunal (Tax and Chancery Chamber) hasdirected the
Financial ServicesAuthority (FSA) to fineSachin Karpe £1.25million
and Laila Karan £75,000and ban them both from performing any rolein
regulated financial servicesfor failing toact withintegrity, in breach of
Principle1of the FSA‟s Statementsof Principlesand Code of Conduct
forApproved Persons(“APER”) and for not beingfit and proper persons.
Between January 2006 to January 2008, Karpe wasDesk Head of the Asia
II Desk at UBS AG (UBS) international wealth management business in
London.
BetweenFebruary 2007and January 2008, Karan worked asa Client
Advisor on theAsia II Desk, reporting directlytoKarpe.
TheAsia II Desk providedservicestocustomersresident in India, or of
Indian origin.
Karpe
During the relevant period Karpecarriedout substantial unauthorised
trading, predominantlyin FX instruments,witha grossvalueof billions
of poundsacross39customer accounts.
He alsomade unauthorisedtransfers and loansbetweenclient accounts
in order to conceal lossesarisingfrom theunauthorised trading.

He directed others(includingKaran) toassist him in arranging the
transfersand loans,and creatingfalsedocumentation for the
unauthorisedtrading.
His scheme resulted in substantial lossesfor 21customers.
UBS hassincepaid compensation to theaffected customersin excessof
US$42million.
Karpe also established an investment structure to enable a major (Indian
resident) customer (via an investment fund incorporated in Mauritius) to
breach Indian law in clearcontravention of UBS guidelines.
Ultimately, the customer invested over US$250million in the fund.
Karpe deliberatelyand repeatedlymisled compliancein order to
accommodatehiscustomer.
Karpe alsomisled UBS and senior management about paying
compensationto a customer using moniesfrom another customer
account.
TheTribunal found that:
“Mr Karpe induced others serving on his desk toparticipatein what was
an obviouslydishonest course of conduct...weinfer that the whole
motivation wastobenefit him indirectlyand in the longterm by
obtainingnew clientsthrough his apparent prestige, increasingfunds
under management and therebyadvancing his career and increasinghis
bonuses.”
TheTribunal acceptedthat the compliancefailings at UBSmight have
created an environment withinwhichstaff could “get awaywith”
misconduct – however, this wasnoexcusefor Karpe‟ssustained
dishonesty.
Karan
Karan did not instigate theunauthorised trading; however, she was
awarethat unauthorised activitywasoccurringon some customer
accountsfor whichshe wasresponsible.

BetweenFebruary2007and January 2008, rather than escalatingthis
knowledge, Karan assisted Karpe in concealing the unauthorised activity.
In particular, Karan preparedfalse, handwrittentelephoneattendance
notespurportingto recordcustomer instructionsshe had received when
shehad taken no such instructions;routed transactionsthrough a
suspenseaccount in order toconceal their origin and destination;signed
a number of UBSdocumentsrecordingthe approval of transactionson
theaccountswithout having received instructionsor authorisation from
thecustomers;and failed to escalateher knowledgeof unauthorisedloans
betweencustomers.
Ms Karan alsofailedto escalate her knowledgethat Mr Karpe had
misled UBSand senior management about paying compensation to a
customer usingmonies from another customer account.
TheTribunal noted that:
“We recognisethat Ms Karan had been placed in an extremely awkward
situation through the manipulation of Mr Karpe.
Thefact, however,is that over and over again shechosetogoalong with
and, on occasions,tofacilitateMr Karpe‟s wrongdoing.”
TraceyMcDermott, actingdirector of enforcement and financial
crime, said:
“Karpeexploitedand abused his positionof trust, and persuaded more
junior employees toengagein misconduct to assisthim.
Such behaviour is in breach of his obligationsto his employer, his clients
andhis colleaguesaswellasto the regulator.
It hasnoplacein the financial servicesindustry.
We welcomethe Tribunal‟sconfirmation that aswell asbanning
Karpe, a significant financial penaltyshould alsobe imposed.
This sendsa clearmessageof theconsequencesof such behaviour.

“Karan sought to categorise herself as a victim in this matter. The
Tribunal (as had the FSA) recognised that she did not initiate the
misconduct, and wasplaced in a difficult positionby Karpe.
However, the findingsand the resultingsanctionssenda clear message
that an approved personmust take responsibilityfor their own actions.
Wherean approved person is awarethat colleaguesareengagingin
misconduct, weexpect them toblow thewhistle,not to become involved
themselves.
“Thosewhotake on the responsibilityof beingan approvedperson
should be in nodoubt about our commitment totake thestrongest
action totacklebehaviour whichfallsbelowthe high standardswe
expect.”
In November 2009the FSAfined UBS£8million for systemsand
controlsfailuresin relationto theunauthorised activitywhichoccurred
on theAsia II Desk.
In December 2011Jaspreet SinghAhuja and in November 2009Andrew
Cumming, both former Asia II Desk client advisers,werebannedand
fined £150,000and £35,000respectively.

Gabriel Bernardino, Chairman of EIOPA
EIOPA, Solvency II and the LossAdjusting Profession
GeneralAssembly of the European Federation of LossAdjusting Experts
Ladies and Gentlemen,
It is a privilegeand pleasure tobe here at the GeneralAssembly of the
European Federation of LossAdjusting Experts.
I wouldlike tostart with a thank you totheorganizersand tothe
President of FUEDI Mr. Rui deAlmeida for invitingme to participatein
thisevent.
In my presentationtoday, I will touchon three main issues:
I.What is EIOPA, the European Insuranceand Occupational Pensions
Authority for whom I have theprivilegetoserveaschairman;
II.How SolvencyII can contributeto theimprovement of risk
management;
III.Thelossadjustingprofession, its relevancefor the insurancemarket
andthe overall society.

What is EIOPA?
EIOPA is the European supervisoryauthority for the insuranceand
occupational pensionssectors.
We are a young organisation:in January, wecompleted our first year asa
European agency, one of thethree European SupervisoryAuthoritiesin
the financial system.
We are an independent Union body withlegal personality, accountable
tothe European Parliament and the Council.
We clearlyseeour mission, tasksand responsibilities.
We see EIOPA‟s mission in protectingpublic interest by contributingto
theshort, medium and longterm stabilityand effectivenessof the
financial system, for theEU citizensand economy.
This mission ispursuedbypromotinga sound regulatory framework
and consistent supervisorypracticesin order toprotect the rightsof
policyholders, pension scheme membersand beneficiariesand
contributeto the public confidencein the European Union‟sinsurance
and occupational pensionssectors.
This is a very important mission if werealize the relevanceof insurance
and occupational pensionsin thedaily life of citizensand on the
development of theeconomy.
Theobjectivesof the new European supervisoryauthorities,and
particularlyof EIOPA, are extremely relevant:
- Contributetoa stableand effectivefinancial system;
- Promote sound regulationand supervision;
- Enhancecustomer protection;

- Ensure thetransparent, efficient and orderlyfunctioningof the
markets;
- Contributetointernational supervisorycoordination;
- Avoid regulatory arbitrage;
- Ensure equal conditionsof competition;and
-Implement appropriate regulation and supervision of risks. In
order tofulfil theseobjectives,EIOPAhas important powers.
We develop technical standardsthat become bindingfor all insurance
undertakingsin theEU and issueguidelinesand recommendationsthat
national supervisorsapplyon a “complyor explain” basis.
We settledisagreementsbetween national supervisory authoritiesin
crossborder situationsand have a coordinatingrole in crisissituations.
EIOPA monitorsthecorrect application of the EU law in thedifferent
MemberStates, byusing, if necessary, its powersof investigation in local
markets.
EIOPA and national supervisorsare independent from one another, but
closelycooperatewithone another.
EIOPA doesnot substitutelocalauthorities.
It hasitsown powersand responsibilities,but day to day supervision
remainsa task of thenational authorities.
Thekey decision organ of EIOPAis theBoard of Supervisors,wherethe
headsof the national supervisory authorities are represented.

However, it is very important tomention that theEIOPARegulation
providesthat membersof the Board of Supervisorsmust act with
independenceand withinthesole interest of the European Union.
Most of our decisionsare taken by simplemajority, some by qualified
majority.
EIOPA wantstorepresent an addedvalueto European consumersand
tothe European supervisorylandscape.
In order tofulfil its mandate, EIOPAis buildingup itsownresources
and exploitingthe knowledgeand experienceof itsMembers.
This is a very important element.
We want to createa truly European supervisoryculture.
Aculture based on best and robust practices.
In order tocreatethisculture, I want to bring together all thenational
supervisoryauthorities.
All of them have an important contribution to make.
EIOPA‟s regulatory tasks
EIOPA hasbeen workingon Solvency II, advisingtheEU Commission
on theLevel 2 implementingmeasures.
We have alsobeen developingdraft technical standardsand guidelines
on around 40different areasof SolvencyII.
We are doingthisin a transparent waybyinformallyconsultingwithkey
stakeholders.
We planto publicly consult assoon asthe legal framework will allow us
todo that.

In order tofacilitatethepreparatory work of insuranceundertakingsfor
SolvencyII, welaunched a number of important public consultationsin
areassuch astheOwn Risk and SolvencyAssessment (ORSA) and
SupervisoryReporting and Public Disclosure, includingtheSolvencyII
XBRL Taxonomy.
We continuedtowork on the SolvencyII specificationsfor exampleby
issuinga joint report on calibrationof non life risk factorsin the
standard formula.
EIOPA alsoprovided input intothe Commission‟srevision of the
InsuranceMediationDirective(IM D) by carrying out an extensive
surveyof national lawsprovidingfor sanctions(both criminal and
administrative) for violationsof the provisionsof the IM D.
The Commission‟s legislative proposal (IMD2) is expected soon and I
am aware that the Commission intends to capture loss adjusters under
thescope of IMD2.
Also, on the regulatoryside, wedeliveredour advice tothe Commission
on the revisionof theIORP Directive.
Stabilityand consumer protection wereat thecore of our advice.
We advocatetheuse of a consistent and realisticmeasurement of all
assetsand liabilitiesand proposed theadoption of a Key Information
Document (KID), containingthe fundamental elementsabout
performance, costs, chargesand risksof definedcontribution schemes.
I believethat thiswill help toincreasetheconfidenceof consumersin
thistype of plans.
Oversight

At EIOPA, we are committed and motivated to contribute to the creation
of a truly European supervisory culture: a culture that promotes
stability, enhancestransparencyand fostersconsumer protection.
Aculture based on intelligent and effectiveregulation whichdoesnot
stifleinnovation.
That is whyin the area of oversight wetook asa priorityour
participationin thecollegesof supervisors,contributing to a more
consistent practice.
In the courseof 2011, collegesof supervisorswithat leastonephysical
meetingor teleconferencewereorganized for 69European insurance
groups.
Last year, weset an annual action plan for collegesof supervisorsand
weremonitoring its actual implementation.
In February 2012,EIOPAissued the report on thefunctioningof
collegesin 2011and theAction Plan 2012for collegesof supervisors.
In theAction Plan, wedefined clear timelineswithinthe collegesfor the
settingup of an appropriateworkplan to deal withthe group internal
model validation process.
Consumer protection and financial innovation
Consumer protection and financial innovationarepriority areasfor
EIOPA.
We have prepared Guidelinesand a Best PracticesReport on Complaints
Handlingby Insurers.
With these Guidelines,weintend tofill an existingregulatory gap at EU
level and promote convergenceof regulatorypractice.

Theywerethe subject of a public consultationat the end of last year and
are dueto be finalised in thesecond quarter of 2012.
At the end of last year, EIOPApublisheda Report on Financial Literacy
and Education Initiativesbynational competent authorities;it wasa
stocktake of existingstructures/ processesin Member States.
This wasin linewitha requirement under our empoweringlegislationto
review and coordinatesuch initiatives.
We collecteddata on consumer trendsamongst our Members
authorities.
This helped usto prepare an Initial Overview, analysing and reporting
on thosetrends.ThisOverview waspublished thisyear in February.
TheOverview identified three keytrends:
(i)Consumer protection issuesaround Payment Protection Insurance
(PPI)
(ii)Development of unit linked life insuranceand
(iii)Increaseduseof comparison websitesby consumers. Thisis just the
start of our ongoingmonitoring of consumer trends.
And finally, wefocusedon disclosureand sellingpracticesof Variable
Annuities.
This exercisewasbrought about by the fact that some variableannuities
productsmay achieveoutcomesthat arenot easyfor consumersto
understand.
We consulted on a draft Report at the end of last year and itsfinal
version waspublishedthis year in April.

Finally, last year, weorganized our first EIOPA Consumer Strategy Day
wherewehad the opportunitytodiscussimportant consumer issueswith
different stakeholders.
Financial stability
EIOPA wasalsoactivein thefinancial stabilitydomain by assessingthe
resilienceof the EU insurancesector tomajor shocksthrough the EU
widestresstest exerciseand by testingdifferent scenarios on the low
yield stresstest whichshowsthat the insuranceindustrywouldbe
negatively affected if a scenario weretomaterialize whereyields remain
lowfor a prolongedperiod of time.
EIOPA alsoissues,on a bi-annual basis, Financial StabilityReports.
One of theconclusionswemade in our December publicationis that
“duetosignificant natural catastrophesduring theexamined period,
reinsurerssuffered above averagelosses.
Furthermore, life insurersmay besubject to the risk of having
insufficient liquidity, which can be emphasised by banking-related
transactions,e.g. through “liquidityswaps”and similar productsaswell
asdue toincreasingsurrenders”.
Furthermore, EIOPA is contributing to macro-prudential discussions
and risk analysis in the context of the European Systemic Risk
Board, supported by the establishment of theEIOPA RiskDashboard.
International relations
EIOPA is fully awareof the importanceof international relationsin a
globalizedworld.
In this area, we provided final advice to the European Commission on
the assessment of the Solvency II equivalence of the Swiss, Bermudan
and Japanesesupervisory systemsand wehave started to contributeto

thedevelopment of robust international standardsby actively
participatingin theworkof the InternationalAssociation of Insurance
Supervisors(IAIS).
During 2011, EIOPAmaintainedits regulatoryand supervisory dialogues
with the US NationalAssociation of Insurance Commissioners
(NAIC), the China InsuranceRegulatoryCommission, the Japanese
Financial ServicesAuthority and the Latin AmericanAssociation of
InsuranceSupervisors.
EIOPA alsoenhanceditsregular exchangeswiththe US Federal
InsuranceOffice (FIO) in the context of FIO‟s responsibilitiesfor
insurancelaw harmonisationat US federal level and in the area of
international relations.
EIOPA‟s values
I wouldlike tosaya couple of wordsabout EIOPA‟svalues.
In our daily activitiesand relationswithour membersand
stakeholders,weare governed by theprinciplesof
Independence,Responsibility, Integrity, Transparency, Efficiencyand
Team Spirit.
We aim to be a modern, competent and professional organization that is
aware of the expectations of European citizens and wants to ensure that
theyall are taken on board in our strategiesand actions.
Our goal is toact independentlyin an effectiveand efficient waytowards
thecreation of a common European supervisoryculture – and thisshould
not be just empty words.
We consider it our shared responsibilitytobuild a sound frameworkfor
thefuture of insuranceactivities;a frameworkthat takesintoaccount the
specificitiesof their businessmodels.

I wouldlike toassure you that weare ambitiousin fulfillingour
obligationstowardsEU citizensand businessesand I am confident that
together wewill succeed.
Solvency II
As you know, SolvencyII is thenew regulatory regimefor theEU
insuranceindustry and will be implementedon 1January 2014.
SolvencyII will bring a better alignment betweenrisk and
capital, promotinggood riskmanagement practicesand fostering
transparency.
Regulatoryregimesare alwaysa result of a balancingact between
different objectives.
SolvencyII will providean appropriate basisfor increasedpolicyholder
protection and will contributetoreinforcefinancial stability, allowing
insurancecompaniesto continuetoplay their natural countercyclical
rolein timesof stressedmarkets.
Gladly, the SolvencyII regimeis increasinglybeingperceived asmore
than a “check thebox” regulatoryexercisethat determinescapital
requirements.
It requires the European insuranceindustryto criticallyanalyze its
risks,and in theprocess, assessthetrue costsattached tothem.
Today, I wouldlike totalk to you particularlyabout risk
management, whichI think isof particularrelevancefor your
profession.
Now, more than ever, insurersneed torelyon strong risk management
capabilitiesin order todeal withthe different challengesposed by the
economicslowdown, the financial market volatility, the stresson
sovereigndebt, thedemographic changesand the evolving pattern of
natural catastrophes.

During the last decade, not only riskmanagement itselfbut alsoits
practical application underwent amajor transformation.
Improvementsin modellingmethodology, significant development of
new internal control instruments, increasinginvestors‟and analysts‟
pressure aswell asa new generation of risk managerswitha more
holistic view arriving in thecompany‟s alsotriggeredchange.
Companieswhichinvested, earlyand continuously, in establishingan
effectiveand well integratedrisk management arenow takingthe
benefitsfrom that strategic decision.
It should not come asa surprise that insurance and reinsurance
undertakingsare at the forefront of applying sound and robust practices
of risk management.
After all, insuranceisin itselfa risk management tool and thusthe
industrypossessa widerange of specific know-howand experiencein
thisarea.
Nevertheless, from an historical perspective, risk management hasnot
been viewedasa relevant element of theinsuranceregulatoryregime.
This haschanged withSolvency II.
I believethat appropriate risk management isa cornerstoneof any
modern risk-basedregulatory regime and consequentlyhasitsown role
in thesupervisoryprocess.
SolvencyII is mostlyknown for itsrisk-basedcapital requirement
calculation.
However, it is essential torecognize that one of the most important
elementsin thisregime is the heavy relianceon robust risk management
practices.

Under the SolvencyII regime, insuranceand reinsuranceundertakings
must havein placean effectiveriskmanagement system comprising
strategies,processesand reportingproceduresnecessaryto
identify, measure, monitor, manage and report, on a continuousbasisthe
risks, at an individual and at an aggregated level, to whichtheyare or
could beexposed, and their interdependencies.
Importantly, risk management cannot beseen asa point in time
procedure.
It is a continuousprocessthat should be used in theimplementationof
theundertaking‟s overall strategy and should allowan appropriate
understandingof the nature and significanceof theriskstowhich it is
exposed, includingitssensitivityto thoserisks and itsability to mitigate
them.
Takingintoconsiderationsome lessonslearned from thefinancial
crisis, SolvencyII identifiesa number of elementswhichareparticularly
relevant for a robust implementation of a risk management system:
•First of all, it is paramount to recognize theultimateresponsibilityof
the management body in ensuringthat the implemented risk
management system is suitable,effectiveand proportionatetothe
nature, scaleand complexityof the risksinherent in thebusiness.
•Secondly, the risk management system needstobe documented and
communicatedtothe relevant management and staff, to ensure it is
embedded withinthebusiness.
•Thirdly, an effectiverisk management system should cover all material
riskstheundertaking might be exposedto.
•Finally, and significantly, the risk management system must be
integratedintothe organizational structureof theundertaking and its
decision-makingprocesses.

From a supervisoryperspective, the insuranceundertaking‟srisk
management system must be comprehensive, coveringat least areaslike
underwritingand reserving, asset–liabilitymanagement, investment,
liquidityand concentrations,operational risk and reinsuranceand other
risk mitigationtechniques.
In each of theseareas,supervisorshave been transparent in their
expectationstowardsundertakings.
Let me touch particularlyon the area of underwritingand reserving.
Underwritingrisk isat the centreof the insurancebusiness.
The risk of loss or of adverse change in the value of insurance liabilities,
due to inadequate pricing and reserving assumptions is clearly related to
thequalityof the informationavailableand itsmanagement.
Consequently, supervisorsexpect that suitableprocessesand procedures
will be in placetoensure the reliability, sufficiencyand adequacyof both
thestatistical and accounting data tobe considered both in the
underwritingand reserving processes.
As part of the system of governance, insuranceundertakingsshould be
requiredto employpersonnel with the skills,knowledgeand expertise
necessaryto dischargethe responsibilitiesallocated tothem properly.
Furthermore, insuranceundertakingsshould ensure that effective
systems arein placetoprevent conflictsof interest and that potential
sourcesof conflictsof interest are identified and proceduresare
established in order toensurethat thoseinvolvedwith the
implementationof the undertaking‟sstrategiesand policies understand
whereconflictsof interest could ariseand how suchconflictsareto be
addressed.
Furthermore, the undertakingshould ensure that all policiesand
proceduresestablishedfor underwritingare appliedby all distribution
channelsof theundertakinginsofar astheyare relevant for them and

that theyhavein placeadequateclaimsmanagement procedureswhich
should cover theoverall cycle of claims: receipt, assessment, processing
and settlement, complaintsand dispute settlement and reinsurance
recoverables.
I believethat thepractical implementation of theserequirementsis of
fundamental relevancefor the lossadjustingprofession.
The LossAdjusting profession
Theprofession of lossadjuster is crucial for the insurancebusinessand
for the society.
Theservicesprovided by lossadjusterstoinsurersand other customers
should be basedon professionalism, independenceand impartial and
accurateassessment of claims.
Theseare indeed thekey wordsof your federation.
Your roleis particularlysensitivein the relationship betweeninsurers
andtheir clientsand claimants.
You have a particularlyrelevant role whendealing withmajor
catastrophes.
I am awarethat, during the yearsof itsexistence,FUEDI made a lot of
effortsin maintaininghigh standardsof professional conduct and
competence, high educational standardsaswell asunified standardsof
customer services.
I believe that these efforts represent a priceless contribution to the fully
integrated and reliable insurance market of the European Union and to
theoverall reinforcement of consumer protection.
I am sure that, in thenear future, thelossadjustingprofessionwill be
further recognizedat the EU level.

In my opinion, it is fundamental to assurethat all lossadjustersworking
in theEU followstrict rulesof professional conduct including
maintainingqualitiesof integrityand impartialityand arebound by
soundlossadjustingpractices.
It is alsomy belief that proper self-regulationis an important tool in this
area, but nevertheless,somebasicprinciplesshould be incorporated in
theEU regulatoryframework.
I am lookingforwardto work in closecooperation with your profession
and withtheinsuranceindustryto ensure increasedconfidencefor
policyholders and beneficiariesin the insurancesector. Thank you.

Speech
Gabriel Bernardino, Chairman of EIOPA
EIOPA, Solvency II and the Loss
Adjusting Profession
GeneralAssembly of the European
Federation of LossAdjusting Experts
Porto, 11May2012
Important parts
I will touch on three main issues:
I.What is EIOPA, theEuropean Insurance
andOccupational PensionsAuthority for
whom I have theprivilegetoserve as
chairman;
II.How SolvencyII can contributeto the
improvement of risk management;
III.Thelossadjustingprofession, its relevancefor the insurancemarket
andtheoverall society.
What is EIOPA?
EIOPA is the European supervisoryauthority for the insuranceand
occupational pensionssectors.
We are a young organisation:in January, wecompletedour first year asa
European agency, one of thethree European SupervisoryAuthoritiesin
thefinancial system.
We are an independent Union body withlegal personality, accountable
tothe European Parliament and the Council.

We clearlysee our mission, tasksand responsibilities.We seeEIOPA‟s
mission in protectingpublic interestbycontributingtothe short, medium
and longterm stabilityand effectivenessof the financial system, for the
EU citizensand economy.
This mission ispursuedbypromotinga sound regulatory framework
and consistent supervisorypracticesin order toprotect the rightsof
policyholders, pension scheme membersand beneficiariesand
contributeto the public confidencein the European Union‟sinsurance
and occupational pensionssectors.
This is a very important mission if werealize the relevanceof insurance
and occupational pensionsin thedaily life of citizensand onthe
development of theeconomy.
Theobjectivesof thenew European supervisoryauthorities,and
particularlyof EIOPA, are extremely relevant:
Contributetoa stableand effectivefinancial system;
Promote sound regulationand supervision;
Enhancecustomer protection;
Ensure thetransparent, efficient and orderlyfunctioningof the
markets;
Contributetointernational supervisoryco2ordination;
Avoid regulatory arbitrage;
Ensure equal conditionsof competition;and
Implement appropriate regulation and supervision of risks.
In order tofulfil theseobjectives,EIOPAhas important powers.
We develop technical standardsthat become bindingfor all insurance
undertakingsin theEU and issueguidelinesand recommendationsthat
national supervisorsapplyon a “complyor explain” basis.
We settledisagreementsbetween national supervisory authoritiesin
crossborder situationsand have a coordinatingrole in crisissituations.

EIOPA monitorsthecorrect application of the EU law in thedifferent
MemberStates, byusing, if necessary, its powersof investigation in local
markets.
EIOPA and national supervisorsare independent from one another, but
closelycooperatewithone another.
EIOPA doesnot substitutelocalauthorities.
It hasitsownpowersand responsibilities,but day todaysupervision
remainsa task of thenational authorities.
Thekey decision organ of EIOPAis theBoard of Supervisors,wherethe
headsof thenational supervisory authorities arerepresented.
However, it is very important tomention that theEIOPA Regulation
providesthat membersof the Board of Supervisorsmust act with
independenceand withinthesole interest of the European Union.
Most of our decisionsare taken by simplemajority, some by qualified
majority.
EIOPA wantstorepresent an addedvalue to European consumersand
tothe European supervisorylandscape.
In order tofulfil its mandate, EIOPAis buildingup itsownresources
and exploitingtheknowledgeand experienceof itsMembers.
This is a very important element. We want tocreatea trulyEuropean
supervisoryculture. Aculture based on best and robust practices.
In order to create thisculture, I want to bring together all the national
supervisory authorities. All of them have an important contribution to
make.

EIOPA‟s regulatory tasks
EIOPA hasbeen workingon SolvencyII, advising the EU Commission
on theLevel 2 implementingmeasures.
We have alsobeen developingdraft technical standardsand guidelines
on around 40different areasof SolvencyII.
We are doingthisin a transparent waybyinformallyconsultingwithkey
stakeholders.
We planto publicly consult assoon asthe legal frameworkwill allow us
todo that.
In order tofacilitatethepreparatory work of insuranceundertakingsfor
SolvencyII, welaunched a number of important public consultationsin
areassuch astheOwnRisk and SolvencyAssessment (ORSA) and
SupervisoryReporting and Public Disclosure,includingtheSolvencyII
XBRL Taxonomy.
We continuedtowork on the SolvencyII specificationsfor exampleby
issuinga joint report on calibrationof non life risk factorsin the
standard formula.
EIOPA alsoprovided input intothe Commission‟srevision of the
InsuranceMediationDirective(IM D) by carrying out an extensive
surveyof national lawsprovidingfor sanctions(both criminal and
administrative) for violationsof the provisionsof theIMD.
The Commission‟s legislative proposal (IMD2) is expected soon and I
am aware that the Commission intends to capture loss adjusters under
thescope of IMD2.
Also, on the regulatoryside, wedeliveredour advice tothe Commission
on the revisionof theIORP Directive. Stabilityand consumer protection
wereat the core of our advice.

We advocatetheuse of a consistent and realisticmeasurement of all
assetsand liabilitiesand proposed theadoption of a Key Information
Document (KID), containingthe fundamental elementsabout
performance, costs, chargesand risksof definedcontribution schemes.
I believethat thiswill help toincreasetheconfidenceof consumersin
thistype of plans.
Oversight
At EIOPA, we are committed and motivated to contribute to the creation
of a truly European supervisory culture: a culture that promotes
stability, enhancestransparencyand fostersconsumer protection.
Aculture based on intelligent and effectiveregulation whichdoesnot
stifleinnovation.
That is whyin the area of oversight wetook asa priorityour
participationin thecollegesof supervisors,contributingto a more
consistent practice.
In the courseof 2011, collegesof supervisorswithat leastonephysical
meetingor teleconferencewereorganized for 69European insurance
groups.
Last year, weset an annual action plan for collegesof supervisorsand
weremonitoring its actual implementation.
In February 2012,EIOPAissued the report on thefunctioningof
collegesin 2011and theAction Plan 2012for collegesof supervisors.
In theAction Plan, wedefined clear timelineswithinthe collegesfor the
settingup of an appropriateworkplan to deal withthe group internal
model validation process.

Consumer protection and financial innovation
Consumer protection and financial innovationarepriority areasfor
EIOPA.
We have prepared Guidelinesand a Best PracticesReport on Complaints
Handlingby Insurers.
With these Guidelines,weintend tofill an existing regulatorygap at EU
level and promote convergenceof regulatorypractice.
Theywerethe subject of a public consultationat the end of last year and
are dueto be finalised in thesecond quarter of 2012.
At the end of last year, EIOPApublisheda Report on Financial Literacy
and Education Initiativesbynational competent authorities;it wasa
stocktake of existingstructures/ processesin Member States.
This wasin linewitha requirement under our empoweringlegislationto
review and coordinatesuch initiatives.
We collecteddata on consumer trendsamongst our Members
authorities.
This helped usto prepare an Initial Overview, analysing and reporting
on thosetrends.
This Overview waspublished thisyear in February.
TheOverview identified three keytrends:
(i)Consumer protection issuesaround Payment Protection Insurance
(PPI)
(ii)Development of unit linked life insuranceand

(iii) Increaseduseof comparison websitesby consumers.
This is justthestart of our ongoing monitoring of consumer trends.
And finally, wefocusedon disclosureand sellingpracticesof Variable
Annuities.
This exercisewasbrought about by the fact that some variableannuities
productsmay achieveoutcomesthat arenot easyfor consumersto
understand.
We consulted on a draft Report at theend of last year and itsfinal
version waspublishedthis year in April.
Finally, last year, weorganized our first EIOPA Consumer Strategy Day
wherewehad the opportunitytodiscussimportant consumer issueswith
different stakeholders.
Financial stability
EIOPA wasalsoactivein thefinancial stabilitydomain by assessingthe
resilienceof the EU insurancesector tomajor shocksthrough the EU
widestresstest exerciseand by testingdifferent scenarios on thelow
yield stresstest whichshowsthat the insuranceindustrywouldbe
negatively affected if a scenario weretomaterialize whereyields remain
lowfor a prolongedperiod of time.
EIOPA alsoissues,on a biannual basis, Financial Stability Reports.
One of the conclusionswe made in our December publication is that
“due to significant natural catastrophes during the examined period,
reinsurerssuffered above averagelosses.
Furthermore, life insurersmay besubject to the risk of having
insufficient liquidity, whichcan be emphasised by banking related
transactions,e.g. through “liquidityswaps”and similar productsaswell
asdue toincreasingsurrenders”.

Furthermore, EIOPAis contributingto macroprudential discussionsand
risk analysis in thecontext of the European Systemic Risk
Board, supported by the establishment of theEIOPA Risk Dashboard.
International relations
EIOPA is fully awareof the importanceof international relationsin a
globalizedworld.
In thisarea, weprovided final advice to theEuropean Commission on
theassessment of theSolvency II equivalenceof theSwiss, Bermudan
and Japanesesupervisory systemsand wehave started to contributeto
thedevelopment of robust international standardsby actively
participatingin theworkof the InternationalAssociation of Insurance
Supervisors(IAIS).
During 2011, EIOPAmaintainedits regulatoryand supervisory dialogues
with the US NationalAssociation of Insurance Commissioners
(NAIC), the China InsuranceRegulatory Commission, the Japanese
Financial ServicesAuthority and the LatinAmericanAssociation of
InsuranceSupervisors.
EIOPA alsoenhanceditsregular exchangeswiththe US Federal
InsuranceOffice (FIO) in the context of FIO‟s responsibilitiesfor
insurancelaw harmonisationat US federal level and in the area of
international relations.
EIOPA‟s values
I wouldlike tosaya couple of wordsabout EIOPA‟svalues.
In our daily activitiesand relationswithour membersand
stakeholders,weare governed by the principlesof
Independence,Responsibility, Integrity, Transparency, Efficiencyand
Team Spirit.

We aim to be a modern, competent and professional organization that is
aware of the expectations of European citizens and wants to ensure that
theyall are taken on board in our strategiesand actions.
Our goal is toact independentlyin an effectiveand efficient waytowards
thecreation of a common European supervisoryculture – and thisshould
not be just empty words.
We consider it our shared responsibilitytobuild a sound frameworkfor
thefuture of insuranceactivities;a frameworkthat takesintoaccount the
specificitiesof their businessmodels.
I wouldlike toassure you that weare ambitiousin fulfillingour
obligationstowardsEU citizensand businessesand I am confident that
together wewill succeed.
Solvency II
As you know, SolvencyII is thenew regulatory regimefor theEU
insuranceindustry and will be implementedon 1January 2014.
SolvencyII will bring a better alignment betweenrisk and
capital, promotinggood riskmanagement practicesand fostering
transparency.
Regulatoryregimesare alwaysa result of a balancingact between
different objectives.
SolvencyII will providean appropriate basisfor increasedpolicyholder
protection and will contributeto reinforcefinancial stability, allowing
insurancecompaniesto continuetoplay their natural countercyclical
rolein timesof stressedmarkets.
Gladly, the SolvencyII regimeis increasinglybeingperceived asmore
than a “check thebox” regulatoryexercisethat determinescapital
requirements.

It requires the European insuranceindustrytocriticallyanalyze its
risks,and in theprocess, assessthetrue costsattached tothem.
Today, I wouldlike totalk to you particularlyabout risk
management, which I think isof particular relevancefor your
profession.
Now, more than ever, insurersneed torelyon strong risk management
capabilitiesin order todeal withthe different challengesposed by the
economicslowdown, the financial market volatility, the stresson
sovereigndebt, thedemographic changesand the evolving pattern of
natural catastrophes.
During the last decade, not only riskmanagement itselfbut alsoits
practical application underwent amajor transformation.
Improvementsin modellingmethodology, significant development of
new internal control instruments, increasinginvestors‟and analysts‟
pressure aswell asa new generation of riskmanagerswith amore
holistic view arriving in thecompany‟s alsotriggeredchange.
Companieswhichinvested, earlyand continuously, in establishingan
effectiveand well integratedrisk management arenow takingthe
benefitsfrom that strategic decision.
It should not come asa surprise that insurance and reinsurance
undertakingsare at the forefront of applying sound and robust practices
of risk management.
After all, insuranceisin itselfa risk management tool and thusthe
industrypossessa widerangeof specific know how and experiencein
thisarea.
Nevertheless, from an historical perspective, risk management hasnot
been viewed asarelevant element of theinsuranceregulatory regime.
This haschanged withSolvency II.

I believethat appropriate risk management isa cornerstone of any
modern risk basedregulatory regime and consequentlyhasitsown role
in thesupervisoryprocess.
SolvencyII is mostlyknown for itsrisk basedcapital requirement
calculation.
However, it is essential torecognize that one of themost important
elementsin thisregime is theheavyrelianceon robust risk management
practices.
Under the SolvencyII regime, insuranceand reinsuranceundertakings
must havein placean effective riskmanagement system comprising
strategies,processesand reportingproceduresnecessaryto
identify, measure, monitor, manage and report, on a continuousbasisthe
risks, at an individual and at an aggregated level, to whichtheyare or
could beexposed, and their interdependencies.
Importantly, risk management cannot beseenasa point in time
procedure.
It is a continuousprocessthat should be used in the implementationof
theundertaking‟soverall strategyand should allowan appropriate
understandingof the nature and significanceof theriskstowhichit is
exposed, includingitssensitivityto thoserisksand itsability to mitigate
them.
Takingintoconsiderationsome lessonslearned from thefinancial
crisis, SolvencyII identifiesa number of elementswhichareparticularly
relevant for a robust implementation of a risk management system:
•First of all, it is paramount to recognizethe ultimateresponsibilityof
the management body in ensuringthat the implemented risk
management system is suitable, effectiveand proportionatetothe
nature, scaleand complexityof the risksinherent in thebusiness.

•Secondly, therisk management system needstobe documented and
communicatedtothe relevant management and staff, to ensure it is
embedded withinthebusiness.
•Thirdly, an effectiverisk management system should cover all material
riskstheundertaking might be exposedto.
•Finally, and significantly, the riskmanagement system must be
integratedintothe organizational structureof theundertaking and its
decision making processes.
From a supervisoryperspective, the insuranceundertaking‟srisk
management system must be comprehensive, covering at least areaslike
underwritingand reserving, asset–liability
management, investment, liquidityand concentrations,operational risk
and reinsuranceand other risk mitigationtechniques.
In each of theseareas, supervisorshave been transparent in their
expectationstowardsundertakings.
Let me touch particularlyon the areaof underwritingand reserving.
Underwritingrisk isat the centreof the insurancebusiness.
The risk of loss or of adverse change in the value of insurance
liabilities, due to inadequate pricing and reserving assumptions is clearly
relatedtothequalityof the informationavailableand itsmanagement.
Consequently, supervisorsexpect that suitableprocessesand procedures
will be in placetoensure the reliability, sufficiencyand adequacyof both
thestatistical and accounting data tobe consideredboth in the
underwritingand reserving processes.
As part of the system of governance, insuranceundertakingsshould be
requiredto employpersonnel with the skills,knowledgeand expertise
necessaryto discharge theresponsibilitiesallocatedtothem properly.

Furthermore, insuranceundertakingsshould ensure that effective
systems are in place toprevent conflictsof interest and that potential
sourcesof conflictsof interest areidentified and proceduresare
established in order toensurethat thoseinvolvedwith the
implementationof the undertaking‟sstrategiesand policiesunderstand
whereconflictsof interest could ariseand how suchconflictsareto be
addressed.
Furthermore, the undertakingshould ensure that all policiesand
proceduresestablishedfor underwritingare appliedby all distribution
channelsof theundertakinginsofar astheyare relevant for them and
that theyhavein placeadequateclaimsmanagement procedureswhich
should cover theoverall cycle of claims: receipt, assessment, processing
and settlement, complaintsand disputesettlement and reinsurance
recoverables.
I believethat thepractical implementation of theserequirementsis of
fundamental relevancefor the lossadjustingprofession.
The LossAdjusting profession
Theprofession of lossadjuster is crucial for the insurancebusinessand
for the society.
Theservicesprovided by lossadjusterstoinsurersand other customers
should be basedon professionalism, independenceand impartial and
accurateassessment of claims.
Theseare indeed thekey wordsof your federation.
Your roleis particularlysensitivein the relationship betweeninsurers
andtheir clientsand claimants.
You have a particularlyrelevant role whendealing withmajor
catastrophes.

I am awarethat, during the yearsof itsexistence,FUEDI made a lot of
effortsin maintaininghigh standardsof professional conduct and
competence, high educational standardsaswell asunified standardsof
customer services.
I believe that these efforts represent a priceless contribution to the fully
integrated and reliable insurance market of the European Union and to
theoverall reinforcement of consumer protection.
I am sure that, in thenear future, the lossadjustingprofessionwill be
further recognizedat the EU level.
In my opinion, it is fundamental to assurethat all lossadjustersworking
in theEU followstrict rulesof professional conduct including
maintainingqualitiesof integrityand impartialityand arebound by
soundlossadjustingpractices.
It is alsomy belief that proper selfregulationis an important tool in this
area, but nevertheless,somebasicprinciplesshould be incorporated in
theEU regulatoryframework.
I am lookingforwardto work in closecooperation with your profession
and withtheinsuranceindustryto ensure increasedconfidencefor
policyholders and beneficiariesin theinsurancesector.

Solvency II SpeakersBureau
TheSolvencyII Association hasestablishedthe SolvencyII Speakers
Bureau for firmsand organizationsthat want to accesstheexpertiseof
Certified Solvencyii Professionals(CSiiPs) and Certified Solvencyii
EquivalenceProfessionals(CSiiEPs).
TheSolvencyII Association will be theliaison betweenour certified
professionalsand theseorganizations,at no cost. We stronglybelieve
that this can be a great opportunity for both, our certified professionals
andtheorganizers.
Tolearnmore:
www.solvency-ii-association.com/ Solvency_II_Speakers_Bureau.html
Course Title
Certified Solvency ii Professional (CSiiP):
Preparing for the Solvency ii Directive of the EU (3 days)
Objectives:
This coursehasbeen designed toprovidewiththe knowledgeand skills
needed to understand and support compliancewiththeSolvencyii
Directiveof theEuropean Union.
TargetAudience:
This course isintendedfor decision makers, managers, professionals
and consultantsthat:
A.Work in Insuranceor Reinsurancefirmsof EEAcountries.
B.Work in Groups- Financial Conglomerates(FC), Financial Holding
Companies(FHC), MixedFinancial Holding Companies
(MFHC), InsuranceHolding Companies(IH C) - providing insurance
and/ orreinsuranceservicesin theEEA, whoseparent islocatedin a
country of theEEA.

C.Want tounderstand thechallengesand the opportunitiesafter the
Solvencyii Directive.
This course ishighlyrecommendedfor supervisorsof EEA countries
that want to understand how countriesseeSolvencyII asa Competitive
Advantage.
This course is also recommended for all decision makers, managers,
professionals and consultants of insurance and/ or reinsurance firms
involvedin risk and compliancemanagement.
About the Course
INTRODUCTION
TheEuropean Union‟sLegislativeProcess
Directivesand Regulations
TheFinancial ServicesAction Plan (FSAP) of theEU
ExtraterritorialApplication of European Law
ExtraterritorialApplication of the SolvencyII Directive
Solvencyii and theLamfalussyProcess
Level 1: FrameworkPrinciples
Level 2: Detailed Technical MeasuresLevel3: Strengthening
CooperationAmong Regulators
Level 4: Enforcement
Weaknessesof SolvencyI
From SolvencyI toSolvencyII
Solvencyii Players
Solvencyii Objectives
THE SOLVENCY II DIRECTIVE
AUnified LegislativeBasisfor Prudential Regulation of Insurers
andReinsurers
Risk-BasedCapitalAllocation
Scope of theApplication
Important Definitions

Value-at-Riskin SolvencyII
Authorisation
CorporateGovernance
GovernanceFunctions
RiskManagement
CorporateGovernanceand Risk Management - Level 2
Fit and proper requirementsfor personswhoeffectivelyrun the
undertakingor haveother key functions
Internal Controls
InternalAudit
Actuarial Function
Outsourcing
Board of Directors:Role and Solvencyii Responsibilities
12Principles– System of Governance (Level 2)
PILLAR 2
SupervisoryReview Process(SRP)
Focuson Risk Management and Operational Risk
Own Risk and SolvencyAssessment (ORSA)
ORSA- TheInternal Assessment Process
ORSA- TheSupervisoryTool
ORSA- Not a Third Solvency Capital Requirement
Capital add-on
PILLAR 3
DisclosureRequirements
TheSolvencyand Financial Condition Report (SFC)
PILLAR I
ValuationOf AssetsAnd LiabilitiesTechnicalProvisions
TheSolvencyCapital Requirement (SCR)
TheValue-at-RiskMeasureCalibratedtoa 99.5% Confidence
Level over a 1-year Time Horizon

TheStandardApproach
TheInternal Models
TheCollectionofAdditional HistoricalData
External Data
The Minimum Capital Requirement (MCR)
Non-CompliancewiththeMinimum Capital Requirement
Non-CompliancewiththeSolvencyCapital Requirement
Own Funds
Investment Rules
INTERNAL MODEL APPROVAL
CEIOPSLevel 2 - Testsand Standardsfor Internal Model
Approval
CEIOPSLevel 2 - The procedure tobe followedfor theapproval of
an internal model
Internal ModelsGovernance
Group internal models
Statistical qualitystandards
Calibrationand validationstandards
Documentation standards
SOLVENCY II, GROUP SUPERVISION AND TH IRD COUNTRIES
SolvencyI: SoloPlusApproach
Group Supervisionunder SolvencyII
Rightsand dutiesof the group supervisor
Group Solvency - Methodsof calculation
Method1(Default method):Accounting consolidation-based
method
Method2 (Alternative method): Deduction and aggregation
method
Parent UndertakingsOutsidethe Community - Verification of
Equivalence
Parent UndertakingsOutsidethe Community - Absence of
Equivalence

Thehead of thegroup isin theEEA and the third country regime
is not equivalent
Thehead of thegroup isin theEEA and the third country regime
is equivalent
Thehead of thegroup isoutsidetheEEAand the third country is
not equivalent
Thehead of thegroup isoutsidethe EEAand the third country
regimeisequivalent
Small and Medium-SizedInsurers:TheProportionalityPrinciple
Captivesand SolvencyII
EQUIVALENCE WITH SOLVENCY II AROUND THE WORLD
Solvencyii and Countriesoutsidethe European EconomicArea
TheInternationalAssociation of InsuranceSupervisors(IAIS)
TheSwissSolvencyTest (SST) and Solvencyii:
Solvencyii and theOffshoreFinancial Centers(OFCs)
Solvencyii and theUSA
Solvencyii and theUS NationalAssociation of Insurance
Commissioners(NAIC) - The Federal InsuranceOffice created
under the Dodd-Frank Wall Street Reform and Consumer
ProtectionAct in theUSA, and the ORSAin theUSA
FROM THE REINSURANCE DIRECTIVE TO THE SOLVENCY II
DIRECTIVE
Directive2005/ 68/ EC of 16November 2005on Reinsurance- The
ReinsuranceDirective(RID)
CLOSING
TheImpact of Solvencyii OutsidetheEEA
ProvidingInsuranceServicestothe European Client
Competing withBanks
Learningfrom theBasel ii Framework
RegulatoryArbitrage:AMajorRisk for Countriesthat see
Complianceasan Obligation, not anOpportunity

Basel II, Basel III, SolvencyII and RegulatoryArbitrage
Challengesand Opportunities:What is next
RegulatoryShopping after SolvencyII
Tolearnmore about theonlineexam you may visit:www.solvency-
ii-
association.com/ CSiiP_CSiiEP_Frequently_Asked_Questions.pdf
www.solvency-ii-association.com/ CSiiP_CSiiEP_Certification_Steps.pdf
Tolearnmore about thecourse:
www.solvency-ii-association.com/ Certified_Solvency_ii_Training.htm

Solvency ii News June 2012

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Solvency ii News June 2012