On 1 June 2018, the European Commission published a Delegated Regulation amending the Solvency II Delegated Regulation ((EU) 2015/35).

As part of its Capital Markets Union (CMU) initiative, the Commission adopted on 30 September 2015 a Proposal for a Regulation on STS Securitisation and a Proposal for an amendment to the Capital Requirements Regulation for banks (CRR) to identify those features which make securitisation transactions simpler, transparent and standardised, and to ensure that appropriate incentives are in place to manage the risks of these instruments, based on clear eligibility criteria. The European Parliament and Council adopted these Regulations on 12 December 2017. These Regulations entered into force on 17 January 2018, but they will apply as from 1 January 2019.

The STS Regulation will be addressed to insurers and will amend the Solvency II Directive. This requires a number of changes to the Solvency II Delegated Regulation to ensure alignment and consistency:

  • the definitions used in the Solvency II Delegated Regulation regarding securitisation will be aligned with those in the STS Regulation;
  • due to the direct applicability of the risk retention and the due diligence requirements in the STS Regulation, as well as the deletion through that Regulation of the empowerments for the Commission to adopt such rules under the Solvency II Directive, the related provisions in the Solvency II Delegated Regulation need to be repealed. This avoids insurers being subject to different requirements under the STS Regulation and the Solvency II Delegated Regulation; and
  • the Commission has developed a new calibration for non-senior tranches of STS securitisations, which should also benefit from an adapted capital charge under Solvency II with improved risk-sensitivity. Technical improvements also have to be made to the methodology of the calculation of the calibrations for the senior tranches.

These amendments with respect to the treatment of STS securitisation investments by insurers will contribute to the creation of an integrated Capital Markets Union.

View: European Commission adopts Delegated Regulation aligning Solvency II Delegated Regulation with Securitisation Regulation