Guideline 12 – Single balance sheet under Article 167 of Directive 2009/138/EC Where any of the advantages set out in Article 167(1) of Directive 2009/138/EC is granted, the host supervisory authority who is to supervise all branches established within the Union should ensure that a single branch balance sheet is drawn up by the third-country insurance undertaking in relation to all branch operations pursued within the Union and which may, at the undertaking’s discretion, eliminate any intra-branch transactions. Guideline 13 – Withdrawal of advantages Host supervisory authorities, which withdraw the advantages granted under Article 167(1) of Directive 2009/138/EC, should promptly inform the supervisory authorities of the other Member States in which the insurance undertaking operates, of the withdrawal of the advantages. Guideline 14 - Supervisory review process The host supervisory authority should ensure that branch operations are subject to review and evaluation as part of the supervisory review process laid down in Article 36 of Directive 2009/138/EC. Guideline 15 – Cooperation and communication between supervisory authorities under the supervisory review process Where host supervisory authorities have granted the advantages referred to in Article 167(1) of Directive 2009/138/EC, they should establish a communication process in line with the one described in the Guidelines on Supervisory Review Process (EIOPA-BoS-14/179). Where the third-country insurance undertaking has branches authorised in more than one Member State but has not applied for any of the advantages under Article 167(1) of Directive 2009/138/EC, the concerned supervisory authorities should agree how to cooperate and exchange information in line with the Guidelines on Supervisory Review Process (EIOPA-BoS-14/179). Guideline 16 - Communication with other supervisory authorities Where a host supervisory authority becomes aware of information that may undermine the position of branch insurance creditors or the availability of branch own funds, it should communicate that information to any other host supervisory authority where the third-country insurance undertaking has received authorisation to establish a branch and to EIOPA. The host supervisory authority should consider if there are other relevant supervisory authorities with whom it should communicate, such as supervisory authorities of related insurance undertakings or branches of other members of the group to which the third-country insurance undertaking belongs. country
The host supervisory authority should ensure that the third-country insurance undertaking, as part of its ORSA, assesses the permanent availability of the branch assets and addresses in its assessment: the risks to the effectiveness of arrangements to ensure that branch assets are paid only to branch insurance creditors and branch preferential creditors; and the risks to the adequacy of branch assets to cover claims of such creditors by at least the amount of the branch SCR if subparagraph (a) of Guideline 25 is not met by the undertaking. Disclosure Guideline 36 - Public disclosure requirements in relation to branches The host supervisory authority should ensure that the third-country insurance undertakings guarantee that branch policyholders can obtain any publicly disclosed information concerning the solvency and financial condition of the whole third-country insurance undertaking, if the rules and regulations of the third-country prescribe such disclosure. Structure and form of the supervisory reporting Guideline 37 – Elements of the regular supervisory reporting The host supervisory authority should ensure that the third-country insurance undertaking submits to it the following information in respect of branch operations at predefined periods under Article 35(2)(a)(i) of Directive 2009/138/EC: a regular supervisory report comprising the information required under Article 35 of Directive 2009/138/EC and these Guidelines, in relation to branch operations, in narrative form and including quantitative data, where appropriate; the ORSA supervisory report in respect of branch operations comprising the results of each regular ORSA performed by the undertaking in accordance with Article 45(6) of Directive 2009/138/EC and these Guidelines, and without delay following any significant change in its risk profile, in accordance with Article 45(5) of Directive 2009/138/EC; completed annual and quarterly quantitative templates in respect of branch operations, as provided for in Guidelines 44, 45 and 47, specifying in greater detail and supplementing, where appropriate, the information presented in the regular supervisory report; a copy of the supervisory reporting documentation of the whole insurance undertaking; a summary of any significant concerns which the home supervisory authority has raised with the third-country insurance undertaking, in the official language of the country where the branch is located. country
Guideline 52 - Supervisory authority’s request for submission of the regular supervisory report The host supervisory authority should decide, considering Guideline 51, on the frequency for the submission by the third-country insurance undertaking of its regular supervisory report in respect of branch operations. Guideline 53 - A summary regular supervisory report Where the host supervisory authority does not require, in accordance with Guideline 51 and 52, a regular supervisory report in respect of branch operations to be submitted in relation to a financial year, it should ensure that the third-country insurance undertaking nevertheless submits to it a summary regular supervisory report which sets out all material changes that have occurred regarding business and performance, system of governance, risk profile, valuation for solvency purposes and capital management in respect of branch operations over the reporting period, and provides a concise explanation about the causes and effects of such changes. The host supervisory authority should ensure that the third-country insurance undertaking submits the summary regular supervisory report in relation to the financial years and within the periods referred to in Guideline 51. Guideline 54 – Deadlines for submission of the ORSA supervisory report The host supervisory authority should ensure that the third-country insurance undertaking submits to it the ORSA supervisory report in respect of its branch operations within 2 weeks after concluding the relevant own risk and solvency assessment. Guideline 55 – Deadlines for submission of the annual quantitative templates The host supervisory authority should ensure that the third-country insurance undertaking submits to it the relevant annual quantitative templates referred to in Guidelines 44 and 47 no later than 14 weeks after the relevant undertaking’s financial year end. Guideline 56 – Deadlines for submission of the quarterly quantitative templates The host supervisory authority should ensure that the third-country insurance undertaking submits to it the relevant quarterly quantitative templates referred to in Guideline 45 no later than 5 weeks after the relevant quarter end. Transitional arrangements Guideline 57 – Transitional information requirements In relation to the first year of application of Directive 2009/138/EC, the host supervisory authority should ensure that the third-country insurance undertaking submits to it the following information, the reference date for which should be the first day of the third-country insurance undertaking's financial year starting on, or after 1 January 2016 but before 1 July 2016:
Governance and risk management Guideline 27 - General governance requirements The host supervisory authority should ensure that the third-country insurance undertaking complies with the system of governance requirements under Articles 41 to 50 of Directive 2009/138/EC, including with the prudent person principle with regard to branch operations. Generally all requirements concerning the system of governance apply to the branch of the third-country insurance undertaking which in many respects is treated like a separate undertaking. However, the fact that from the point of view of the third-country insurance undertaking the branch operations are part of the undertaking’s operations and not treated as if the branch were a separate entity, has to be taken into account. The third-country insurance undertaking has to provide an effective system of governance for the branch operations which ensures the sound and prudent management of the branch operations and is proportionate to its nature, scale and complexity. It has to comply with all requirements concerning organisational structure, allocation and separation of responsibilities, written policies, continuity plans, remuneration requirements and all specific governance requirements as set out in Articles 42 and 44 to 49 of Directive 2009/138/EC and relevant provisions of the Commission Delegated Regulation (EU) 2015/35, concerning these articles. These guidelines avoid undue costs being imposed on branches by permitting governance and key functions to be exercised from the head office or from the branch. If exercised from the head office then those functions will be subject to the home supervisory authority’s rules and where those rules comply with international standards similar results will be achieved without any material additional cost. Only if the home jurisdiction is not equivalent or does not adopt internationally agreed standards will additional costs be incurred. Guideline 29 – Language and reporting of governance policies The host supervisory authority should ensure that the third-country insurance undertaking has written policies covering the governance arrangements to comply with Guideline 7, available in a language agreed by the host supervisory authority, and include information in its regular supervisory reporting regarding how it satisfies those governance requirements. Generally, the requirements only apply with regard to branch operations. The third-country insurance undertaking can however demonstrate compliance with requirements also by meeting those requirements at the level of the undertaking, e.g. by establishing key functions for the undertaking including the branch or implementing a risk management or internal control system for the undertaking which covers the branch operations. In case of non-compliance with the governance requirements where the insurance undertaking does not apply requirements to the branch
Annex III: Resolution of comments Summary of Comments on Consultation Paper EIOPA-CP-14/048 CP-14-048-GL on third-country branches EIOPA would like to thank Insurance and Reinsurance Stakeholder Group (IRSG), Association of Bermuda Insurers and Reinsurers (ABIR), CFO Forum and CRO Forum, Federation of European Accountants (FEE), Insurance Europe, International Underwriting Association of London (IUL), Life Insurance Corporation of India - UK Branch (LICI UK), and The American Insurance Association (AIA). The numbering of the paragraphs refers to Consultation Paper No. EIOPA-CP-14/048. No. Name Reference Comment Resolution 1. IRSG General Comment Although it is clear that the Solvency II Directive is not very specific about how third country branches have to be dealt with, the IRSG believes that the draft adds many new requirements which can be questioned on legal grounds as it appears that EU legislation is being extended to third country undertakings. There is concern over unintended consequences in terms of possible retaliation by third country jurisdictions: - the nature of the requirements may lead to retaliation by third country supervisory authorities against branches of EU undertakings in their jurisdictions; - if the same requirements (such as annual and quarterly reporting, approval of key persons and the localisation of assets) were to be requested everywhere, this would add significantly to the costs of EU undertakings with branches in third countries. Disagreed These draft guidelines intend to develop a comprehensive supervisory framework for branches consistent with Solvency II and in large part are therefore directed at supervisory authorities and their supervision practices which is not the same as imposing new laws. All requirements are transposed from Solvency II requirements for undertakings. In the case of reporting requirements the directive allows for supervisory authorities to obtain such information as they
solvency margin, should be deemed to be met, since it will be subject to rules equivalent to those of Solvency II. We note also that, where several firms are from the same home jurisdiction, it would be inefficient and costly in time and resources for the host supervisor and for the firms if the same information and very similar legal opinions were to be required from each one of them. Lastly, the requirements imposed by Europe on third-country undertakings will be seen as a model by other jurisdictions in both emerging and developed markets. The adoption in those markets of new capital and reporting requirements, following the example of the EU, could lead to significant costs for European undertakings seeking to operate abroad. An EU model based on a pragmatic and proportionate approach is therefore needed in the interests of freedom of commerce. Disagreed EIOPA disagrees to consider the undertaking as solvent because it is established in an equivalent jurisdiction. On equivalence, please also see answer to comment 1 Partially agreed See response on this issue in same comment above. Partially agreed High standards are imposed to the extent needed for the protection of policy holders. Ring-fencing only applies to branches coming from granting a preferential treatment to their nationals. 7. LICI UK General Comment LICI UK branch ( LICI UK ) is a very small life insurance branch of Life Insurance Corporation of India ( LICI ) which is a very large global life insurance firm having its head office in Mumbai, India. LICI is wholly owned by the Government of India and is authorised and regulated by the Insurance Regulatory and Development Authority of India ( IRDA ). The annual GWP ( gross written premium ) of LICI UK branch is less than £ 5million which is much less than 0.05% of LICI’s overall Partially agreed As regards proportionality, proportionality should apply across the paper. Therefore it is not necessary to include a specific guideline on proportionality. Please
27. This comment was submitted as confidential by the stakeholder. 28. LICI UK 1.8. Not clear as to how specific TCB templates will be provided - reference is made to Technical Annexes III & IV Noted Please, see answer to comment 25. The IT format for submission is to be decided by each supervisory authority. However, the XBRL taxonomy being developed by EIOPA will include TCB templates. 29. This comment was submitted as confidential by the stakeholder. 30. This comment was submitted as confidential by the stakeholder. 31. Insurance Europe 1.9. It is not clear what the spreadsheet mentioned in this paragraph refers to, as what is currently available on the EIOPA website is Technical Annexes III and IV. Please clarify the name of this spreadsheet and where it can be found. Noted All material will be publically available on EIOPA website. 32. LICI UK 1.9. Will the complete package of templates applicable to third country branches be available with the final EIOPA Policy Statement? Simplification of reporting requirements is requested as otherwise excessive and disproportionate. Noted Please, see answers to comments 3, 25 & 31. 33. This comment was submitted as confidential by the stakeholder. 34. This comment was submitted as confidential by the stakeholder.
35. This comment was submitted as confidential by the stakeholder. 36. IRSG 1.11. Under f) last line: “Articles 89 and 90…” Under k):”policyholders within the meaning of Article 268 (g) of Directive 2009/138/EC” Under n) intro: “means any claim which….insurance undertaking ranks…” Amended 37. This comment was submitted as confidential by the stakeholder. 38. This comment was submitted as confidential by the stakeholder. 39. IRSG Guideline 1 - 1.13 First line: “of a branch of a third-country…” Fifth line:” need for supervisory purposes…” Noted 40. ABIR Guideline 1 - 1.13 Guideline 1 requires the third-country undertaking to have an adequate solvency margin under its home jurisdiction rules, not under Solvency II rules. In this regard, third-country jurisdictions having been deemed equivalent should automatically be deemed as having an adequate solvency margin. Partially agreed Please see answer to comment 1. 41. This comment was submitted as confidential by the stakeholder. 42. Insurance Europe Guideline 1 - 1.13 The conditions that a third country undertaking must meet in order for its branch to be granted an authorisation are specified in Article 162(2) of the Solvency II Directive. As noted earlier, we have concerns over whether it is appropriate for EIOPA to add to this list – agreed by EU institutions – by way of Guidelines. If, nevertheless, EIOPA is determined to pursue this course of action the paragraph should read less ambiguously. We suggest the following: When authorising or continuing authorisation of a branch of a insurance undertaking, a host supervisory authority should be Disagreed These draft guidelines intend to develop a comprehensive supervisory framework for branches consistent with Solvency II and in large part are therefore directed at supervisory
1.14 home supervisory authority when the home jurisdiction’s solvency regime has been deemed equivalent with Solvency II. EIOPA disagrees to consider the undertaking as solvent because it is established in an equivalent jurisdiction. On equivalence, please also see answer to comment 1. 48. This comment was submitted as confidential by the stakeholder. 49. Insurance Europe Guideline 1 - 1.14 This paragraph should be deleted as it goes beyond the Directive and the requirements it sets out are hardly manageable. It is unrealistic to expect that the host supervisor will possess the experience necessary to apply the home jurisdiction’s solvency regime. Disagreed High standards are imposed to the extent needed for the protection of policy holders. Ring-fencing only applies to branches coming from granting a preferential treatment to their nationals. These draft guidelines intend to develop a comprehensive supervisory framework for branches consistent with Solvency II and in large part are therefore directed at supervisory authorities and their supervision practices which is not the same as imposing new laws. All requirements are transposed from
resource-hungry examination of the distribution of assets, very probably followed by a further need for legal advice, as is suggested in paragraph 1.19. may have little or no ability to alter the priorities of creditors. Supervisors need to understand how the branch assets will be distributed in a of the undertaking 66. LICI UK Guideline 3 - 1.16 1. The host regulatory authority has to satisfy themselves of this requirement. The UK Branch returns and financial data will provide this information if/as may be required. 2. The branch assets would be solely used for paying branch liabilities ( claims of branch policy holders ). Branch would maintain the required solvency for the branch liabilities. 3. Please advise if any other information is required by the host regulator from the TCB in this connection Noted 67. This comment was submitted as confidential by the stakeholder. 68. This comment was submitted as confidential by the stakeholder. 69. Insurance Europe Guideline 4 - 1.17 This paragraph should be deleted as it goes beyond the requirements set by the Directive. Partially agreed EIOPA has reduced the burden of requiring each insurance undertaking to provide a legal opinion and instead has provided for supervisory authorities to rely on opinions from other sources to avoid duplication of costs. 70. IUL Guideline 4 - As suggested in our response to 1.16, there may be more simple and Partially agreed
significance of proportionality. mean one guideline is more important than the others. 239. IUL Guideline 48 - 1.80 Guideline 48 appears very sensible. It will relieve both firms and regulators of unnecessary effort and increase efficiency accordingly. Agreed Welcomed and agreed 240. LICI UK Guideline 48 - 1.80 Proportionality considerations are requested for both TCBs and their third country undertaking’s reporting requirements – 1) LICI UK branch ( TCB) will submit annually the solvency assessment and balance sheet as required by Solvency II rules 2) LICI as third country insurance undertaking will submit its annual balance sheet for its overall global operations as per regulatory requirements of its home regulator ( IRDA) Noted Please, see answers to comments 3 and 185. 241. This comment was submitted as confidential by the stakeholder. 242. IRSG Guideline 49 - 1.81 Clarify the words “and the remaining part” in fourth line Noted The remaining part is the business of the undertakings after deduction of the material RFF and material MAP parts. 243. This comment was submitted as confidential by the stakeholder. 244. IRSG Guideline 50 - 1.82 Third line: “authorities comply…” Amended 245. Insurance Europe Guideline 50 - 1.82 Please amend this guideline so it refers to the host supervisory authority and not the national supervisory authority to use consistent references. Amended
362. This comment was submitted as confidential by the stakeholder. 363. This comment was submitted as confidential by the stakeholder. 364. IRSG TA I (48) First and second lines: “for the calculation of the branch’s Solvency Capital Requirement, third country….” Amended 365. This comment was submitted as confidential by the stakeholder. 366. IRSG TA I (49) “with regards to the branch’s SCR…. Amended 367. This comment was submitted as confidential by the stakeholder. 368. This comment was submitted as confidential by the stakeholder. 369. IRSG TA I (53) Third line: “of the process in place…” Amended 370. IRSG TA I (57) Second and third lines: “ with the branch’s MCR or the branch’s SCR…. Amended 371. IRSG TA I (59) Under a) third line: “any remedial measures taken, an explanation…” Amended 372. Federation of European Accountants (FEE) TA II Items (a) and (d) have the same description but represent different amounts. The description of one (or both) of these items should be amended to distinguish between them. Items (c) and (f) have the same description but represent different amounts. The description of one (or both) of these items should be amended to distinguish between them. Noted 373. IUL TA II We note that in Annex II, the top half of the balance sheet only includes assets “subject to rights in rem” and “branch assets subject to trust/security/collateral arrangements in favour of creditors with branch Noted EIOPA has clarified this issue in the annex.