Insights

The MFSA has issued a Guidance Paper on Insurance Groups under Solvency II providing key insight on the main features of the Solvency II Directive on (re)insurance groups.

National authorities are required to supervise (re)insurance groups holistically. The fundamental benefit of group supervision is that of addressing the risks which exist within the group and which are not limited to the (re)insurance undertakings. The Guidance Paper lists the different scenarios where the exercise of group supervision is assigned to the competent national authority. This ensures a prudential regime in relation to group supervision.

Furthermore, the Guidance Paper deals with group solvency capital requirements which are crucial for the protection of policy holders and the efficient allocation of capital across the EU. It explains the methods for calculating these capital requirements: the default accounting consolidated method and the alternative deduction and aggregation method. The Guidance Paper also lists the rules on group systems of governance, including the Own Risk and Solvency Assessment (ORSA), risk concentration and intra-group transactions, and reporting requirements at group level.

At a future date the MFSA may issue further guidance on (re)insurance groups as the drafting of the Level 2 and 3 measures of the Solvency II Directive is still being finalised.