The Federation of European Risk Management Associations (FERMA) has released its third EU Policy Note, revealing details of the European Commission's review of the Solvency II Directive.
The review highlights the need to address any unintended consequences of the original directive, including overly demanding requirements on smaller and non-complex insurers. The Federation also suggests that prudential rules governing EU (re)insurance business have been found to have been applied inconsistently and insufficiently.
As the majority of captives domiciled in EU member states are expected to meet SNCU criteria in Article 29a, the revised Solvency II Directive should further benefit these captives through greater proportionality.
This has been highlighted by Laurent Nihoul, board member and chair of the captive committee at FERMA, who comments: “Proportionality is a significant development for the European captive (re)insurance market and has been a critical objective for FERMA in recent years. Holding captives to the same regulatory requirements as large, diversified insurers places excessive administrative burdens and costs on such entities.”
The policy note lastly outlines a derogation available to captives, where they may be classified as SNCU even if non-compliant with the three principle areas outlined under Article 29a: scale, nature and risk profile.
This is provided that they comply with the following: that all insured persons are legal entities of the group of which the captive insurance undertaking is part, and/or, the insurance obligations and contracts do not consist of any compulsory third-party liability insurance.
Typhaine Beaupérin, CEO of FERMA, concludes: “Captives are an essential part of a vibrant and competitive EU insurance market, enabling parent companies to have greater control over risk management strategies and insurance coverage.”
