EIOPA opens first batch of consultations on technical standards after Solvency II Review

EIOPA has opened the first wave of post‑review Solvency II technical standard consultations, setting out how key elements of the revised regime will operate in practice for EU insurers and reinsurers from an operational, risk and supervisory perspective. The package, launched on 1 October 2024, comprises five consultations – four on Regulatory Technical Standards (RTS) and one on Implementing Technical Standards (ITS) – and marks the move from political agreement to detailed rule‑setting.

EIOPA states that these consultations implement mandates arising from the political agreement on the Solvency II review, translating high‑level reforms into binding technical detail once adopted by the European Commission. The standards are intended to guide implementation of new Solvency II features in a way that improves supervisory effectiveness, risk management and financial stability in the EU insurance sector, showing that the focus is as much on supervisory process and liquidity as on headline capital ratios.

The consultations cover a broad range of topics, from cross‑border supervision and insurers’ liquidity management to the criteria for identifying exceptional sector‑wide shocks, indicating that EIOPA is prioritising areas where supervisory coordination and crisis‑readiness are central. For investment and ALM teams, this means the first concrete changes they will see from the review are likely to be in how liquidity risk is governed and how stress events are defined and escalated, rather than in immediate recalibration of capital charges.

One of the draft RTS focuses on enhancing the supervision of cross‑border activities, an area that has been politically sensitive given past failures in cross‑border business models. EIOPA explains that this RTS sets out the conditions and criteria host supervisors should consider when determining the relevance of cross‑border activities for their domestic market, effectively operationalising when and how host authorities step up scrutiny of incoming business. For groups writing material cross‑border life or annuity business, this narrows the ability to treat host supervision as a largely procedural matter and increases the likelihood of more intrusive oversight where local exposures are deemed material.

According to EIOPA, the draft RTS on relevant insurance and reinsurance for the host market is now out for public consultation, giving firms a defined opportunity to influence how “relevance” is assessed in practice. The conditions and criteria that host supervisors will apply will shape how quickly concerns about cross‑border product design, reserving or investment risk feed into supervisory action, which in turn affects how groups structure capital, reinsurance and asset allocation between home and host entities. Insurers with sizeable cross‑border savings or unit‑linked books will need to be able to demonstrate that investment strategies and liquidity arrangements are strong not only in relation to home‑state expectations but also to host‑market views of local policyholder risk.

Another consultation addresses liquidity management of insurers, indicating that EIOPA intends to codify more prescriptive expectations on how firms monitor and manage liquidity under Solvency II. While details sit in the draft standards, the choice of topic indicates that liquidity frameworks, stress testing and contingency planning will be more tightly specified, with direct implications for holding buffers of cash and high‑quality liquid assets versus illiquid credit or alternative assets. This reduces scope for firms to rely solely on internal liquidity narratives when justifying high allocations to less liquid assets within capital‑efficient structures.

EIOPA is also consulting on criteria for identifying exceptional sector‑wide shocks, which will define when the regime recognises that the market is in an extraordinary stress environment rather than a normal cycle. Once adopted, these criteria will influence when supervisors and firms can invoke exceptional measures, and how they calibrate and interpret stress scenarios used in risk management and ORSA processes. For investment teams, this will frame the boundary between “business as usual” spread and rate volatility and the kind of systemic dislocation that might justify different management actions or supervisory forbearance.

The current consultations are explicitly linked to the comprehensive Solvency II review initiated by the European Commission in 2021, which aims to enhance sector resilience to future crises, strengthen policyholder protection and simplify rules where appropriate. EIOPA’s move to consult on RTS and ITS based on the political agreement means the direction of travel is now fixed at a high level; the remaining negotiation is around calibration and process detail rather than core design. For insurers, this shifts the task from lobbying on primary legislation to preparing internal models, governance and reporting to align with more granular supervisory expectations.

EIOPA emphasises that, once adopted, these technical standards will guide implementation of the new Solvency II features to improve supervisory effectiveness, risk management and financial stability across the EU insurance sector. Investment, ALM and capital teams now need to engage with the consultations to ensure that emerging liquidity, cross‑border and shock‑definition standards are workable for existing asset strategies, as the final RTS and ITS will constrain how far firms can stretch liquidity and cross‑border business models within the revised regime.

--- Sources: https://www.eiopa.europa.eu/eiopa-opens-first-batch-consultations-technical-standards-after-solvency-ii-review _en https://www.eiopa.europa.eu/document/download/f6da291a-d14a-4651-84da-a8602c8e1556_en?filename=EIOPA-BoS-25-243_Final+report+on+draft+RTS+on+relevance+for+host+market.pdf