Guidelines on the methodology for equivalence assessments. Thirdcountry equivalence and access to the eu financial. The solvency ii directive anticipates that in circumstances where the european commission has not taken a decision on the equivalence of a particular third country, then, under article 2272 of solvency ii directive, the group supervisor shall carry out the verification of the equivalence of the third country. This means that the insurance regimes of bermuda excluding captives, australia, brazil, canada, mexico and the us are one step closer to full equivalence with the european directive. Switzerland is granted full equivalence in all three areas of solvency ii. Where a third country is granted equivalence for reinsurance pursuant to article 172 of the solvency ii directive, reinsurance contracts entered into with reinsurers in that jurisdiction must be treated in the same manner as contracts entered into with eea reinsurers. This is of relevance to eu insurers operating in a third country. These equivalence decisions take the form of delegated acts and concern switzerland, australia, bermuda, brazil, canada, mexico and the us.
Third country equivalence in eu banking legislation. Similarly, under article 2601 of solvency ii directive, where there is no decision of the european commission on equivalence, the verification of whether a particular third country exercises equivalent group supervision to that provided for under solvency ii shall be carried out by the eu supervisory. If a prudential regime of a third country is deemed equivalent under article 260, its insurance groups which are active in the eu are exempted from some aspects of. The really sensitive us thirdcountry equivalence issues are therefore around group supervision and reinsurance. European commission adopts first series of third country. Solvency ii empowers the ec to eq uiv al nce dsio of th ry s solvency and prudential regime. Title iii third country eequivalence and final provisions arts. This will mean that if the uk is considered a third country under solvency ii, insurers with a head office in the uk would need to apply for branch authorisation in. These decisions relate to switzerland, australia, bermuda, brazil, canada, mexico and the united states of america us. Activity with respect to solvency ii is increasing in the united. How important is sii equivalence for third country reinsurers. European commission adopts first series of third country equivalence decisions sidley austin llp to view this article you need a pdf viewer such as adobe reader.
Temporary equivalence will be available to third countries with a solvency ii type solvency model in relation to group supervision and reinsurance activities, subject to certain conditions. Third country equivalence aspects of the credit risk. Bifurcated equivalency in 2010, the european commission ec tasked the european insurance and occupational pensions authority eiopa to provide a preliminary assessment of the bmas supervisory regime to determine whether it satisfied the general criteria for thirdcountry equivalence under solvency ii. Client update solvency ii equivalence decisions and u. Where equivalence exists eu supervisors should rely on the group supervision of that third country. As with the solvency ii provisions, under the agreement, the host supervisory authority may exercise group supervision, where appropriate, with regard to a home party reinsurance group at the level of the top parent undertaking within its. This submission provides advice for the level 2 implementing measures referred to in articles 172 reinsurance supervision chapter i, 227 group sol.
On 26 november 2015, the european commission adopted thirdcountry equivalence decisions in respect of bermuda and japan under the european solvency ii regime which comes into force on 1 january 2016. The issues around solvency ii equivalence in particular are complicated and the purpose. Temporary equivalence will be available to third countries with a solvency ii type. The commission can only properly and lawfully decide that a thirdcountrys supervisory system is solvency ii equivalent if its reinsurance, group capital andor group supervisory systems. Solvency ii equivalence is good in a sense that it eliminates that potential second level of regulation having to deal with bermudian and european regulators. Insurance groups headquartered in an equivalent third country will be supervised for the purposes of group supervision by the third. On june 5, 2015, the european commission adopted its first third country equivalence decisions under solvency ii, which concern, among others, the u. How important is solvency ii equivalence for third country.
Many experts believe europe will also benefit from the decision to give bermuda equivalence. Solvency ii directive on 5 june 2015, the european commission adopted its first third country equivalence decisions under solvency ii. The solvency ii directive recognises that the insurance industry is a global industry. Group supervision article 260 of the solvency ii directive relevant for insurers from third countries with activities in the eea. Full solvency ii equivalence status will allow eu insurers with subsidiaries in an equivalent third country to calculate the subsidiaries capital and own funds using the solvency rules of that third country. Solvency ii equivalence on 5 june 2015, the eu commission adopted draft delegated acts on third country equivalence decisions under the solvency ii directive. If a solvency regime of a third country is deemed equivalent under article 227 solvency ii directive, eu reinsurance groups can do their eu prudential reporting for a subsidiary in that third country under local rules instead of solvency ii, if deduction and aggregation is allowed as the method of consolidation of group accounts. Equivalence between third country jurisdictions and the eu can bring benefits eu insurers can use local rules in equivalent jurisdictions to. Third country equivalence background solvency ii equivalence is defined at three levels.
As a result of this, the commission has asked eiopa to carry out a technical analysis as opposed to a full equivalence assessment of the following in relation to a number of countries. Equivalence overview of the naic smi project orsa erm as a. Solvency ii equivalence for third countries means a noneu jurisdiction has an insurance regulatory regime that ac hiev e st e m ou determined under the solvency ii framework. The european commission will take the final decision of equivalence. The solvency ii directive is a new regulatory framework for the european insurance industry that adopts a more dynamic riskbased approach and implements a nonzero failure regime, i. Demystifying solvency ii equivalence decisions page 1 of 2. The link to the solvency ii directive is available on the mfsa website mt under insurance solvency ii solvency ii directive 2 seventh council directive 83349eec of june 1983 based on the article 54 3 g of the treaty on consolidated accounts. Equivalence can only be requested by third countries where it is explicitly. The european commission may decide about the equivalence of a third country s solvency and prudential regime towards avoiding unnecessary duplication of regulation. First equivalence decisions under solvency ii adopted europa eu. On 26 november 2015, the european commission adopted thirdcountry equivalence decisions in respect of bermuda and japan under the european solvency ii regime which comes into force on 1 january. Regulation 201535eu solvency ii delegated regulation. In the insurance field, under solvency ii, 93 three series of implementing decisions have been adopted. But to what extent does equivalence impact reinsurers based in noneea jurisdictions or third countries using the solvency ii terminology and the credit that.
Guy soussan and algirdas semeta authored an article titled solvency ii equivalence. Ten things you need to know about solvency ii global law. Eea and, on eea insurance groups that have third country subsidiaries. Certain jurisdictions have worked to secure equivalent. A positive equivalence determination under article 227 of directive 20098ec, by a delegated act of the commission, allows such groups, when deduction and aggregation is used as the consolidation method for their group reporting, to take into account. The issue of equivalence continues to be a hot topic as the solvency ii regime is rolled out. Thirdcountry equivalence in eu banking legislation. Third country equivalence the crr empowers the european commission to make decisions on whether a noneea states prudential and supervisory requirements are equivalent to those of the eu in relation to a number of credit risk treatments. Sieverling reinsurance association of america presentation overview u. Insurance and reinsurance news february 2017 the euus. After receiving equivalence, eu insurers can use local rules to report on their operations in third countries, while third country insurers are able to. Assessment equivalence under the solvency ii directive is not a single determination in relation to a third country s solvency regime, but three separate decisions, each with its own requirements and very specific effects. On 5 june 2015, the european commission adopted its first third country equivalence decisions under solvency ii, granting switzerland, australia, bermuda, brazil.
Those who follow these things will be familiar with the concept of solvency ii thirdcountry equivalence. Response cas seminar on reinsurance june 6, 2011 joseph b. Under the solvency ii directive the european commission may determine whether the solvency regime of a third country is equivalent to that laid down in solvency ii in relation to three areas of focus. Solvency ii equivalence decisions switzerland, usa. On 5 june 2015, the eu commission adopted draft delegated acts on third country equivalence decisions under the solvency ii directive. Solvency ii also provides for temporary and provisional equivalence regimes. European commission recognises the swiss insurance. The european commission has adopted its first third country equivalence decisions under the solvency ii regulatory regime. If an eu insurer is active in a third country which is deemed equivalent, it can carry out its eu prudential reporting for a subsidiary in that third country under the rules of the third country, instead of solvency ii rules. Where a thirdcountry solvency regime is deemed provisionally equivalent, eu groups may use the thirdcountry capital requirements and ownfund rules for subsidiaries established in that third country when calculating groupwide solvency under the deduction and aggregation method. Chapter ii related third country insurance and reinsurance undertakings art.
Solvency ii thirdcountry equivalence eiopas handoff. Ten things you need to know about solvency ii global law firm. On 5 june 2015 the european commission published its first set of third country equivalence decisions made under directive 20098eu1 solvency ii. The european commission may decide about the equivalence of a third countrys solvency and prudential regime towards avoiding unnecessary duplication of regulation. Reinsurance supervision article 172 group solvency calculation article 227 group supervision article 260 affects noneu reinsurers groups with eu parent groups with noneu parent nonequivalence may have to post collateral in eu required to use. European commission press release details page european commission press release brussels, 05 june 2015 the european commission has today adopted its first third country equivalence decisions under solvency ii, the eus new prudential regulatory regime which sets out rules to develop a single market for the insurance sector. The commission has developed a transitional regime for solvency ii equivalence for third countries which either have a risk based regime similar to solvency ii or are willing and committed to move towards such a risk based regime over a pre defined period 5 years in initial commission proposal. Ceiops advice for level 2 implementing measures on. Solvency iis long reach beyond europe reinsurance group of. Suprises over european commissions solvency ii country. Article 172 relates to equivalence of the solvency regime applied to the reinsurance activities of insurers 1 with their head office in the.
The december 9 article focuses on the european commissions delegated decision, published on november 26, which grants bermuda full equivalence under solvency ii. Solvency ii equivalence in early december 2009 the committee of european insurance and occupational pensions supervisors ceiops issued consultation paper no. Equivalence between third country jurisdictions and the eu can bring benefits eu insurers can use local rules in equivalent jurisdictions to report on their operations in third countries, reinsurers based in an equivalent jurisdiction can be treated in the. On 26 october 2011, eiopa published its report, advising that bermudas regulatory framework for commercial insurers is broadly equivalent with the directive. How important is sii equivalence for third country. It is not just one way in terms of the benefits of equivalence. Eiopa publishes opinion on the group solvency calculation in relation to third country equivalence. Equivalence under solvency ii is a threedimensional determination in relation to a third countrys, i. In a second phase, the commission will invite ceiops to provide advice on individual country assessments.