EMEA Captive


Simplifying the complex


EMEA Captive spoke with Carlos Montalvo of the European Insurance and Occupational Pensions Authority (EIOPA) about the evolving Solvency II regime and likely captive treatment under the emerging framework.


European Commission (EC) have sought to allay these fears through an extensive consultation process, with the intention of adjusting and finalising a framework that takes into account the specific nature of a disparate array of insurance entities—no simple task. It is clear from conversations with those in the captive sector that despite its consultative efforts, EIOPA still has some reassuring to do. Talking with Carlos Montalvo, executive director of EIOPA, it becomes evident, however, that there is reason for cheer in the captive sector in 2012. As Montalvo outlined, following the results of the Quantitative Impact Study 5 (QIS5)—an industry review of the measures being considered by EIOPA and the EC—there will now be “simplifications introduced on the Level 2 technical implementation of Solvency II for captive entities”.


F The new guidelines “acknowledge the specific nature of captives


in calculating the solvency capital requirement (SCR) for insurance entities”, he said, and allow appropriate simplifications. Montalvo


or some time now the European captive industry has expressed concern regarding the scope and potential ramifications of Solvency II. The European Insurance and Occupational Pensions Authority (EIOPA) and the


indicated that there had been similar requests from small and medium- sized insurers—firms that were not themselves captives—to be included among those entities able to apply a simplified formula to their Level 2 requirements, but said that it had been made clear that “only captives could benefit from the simplified SCR calculations”. The outcome was “good news for the captive industry” with the changes likely to be included in the next full draft expected from the EC. Final approval remains with the EC, but already there is ad hoc application of the new, less onerous requirements. Captives will be hoping that facts on the ground and support from EIOPA will translate into legislative approval for simplification from the EC.


While Montalvo welcomed the proposed simplification of SCR


requirements for captives, he said that the industry “should not be in favour of Solvency II-light”. As he outlined: “Solvency II’s intention is to afford protection to European policyholders as well as ensuring financial stability. EIOPA would therefore not be content with the idea that under Solvency II captives would apply a different framework than their commercial counterparts.” Rather, they should offer levels of protection commensurate with the risks involved, and in order to balance the concerns of captives and consumers alike,


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