The European Insurance and Occupational Pensions Authority (EIOPA) has published a Supervisory Statement on the supervision of run-off undertakings. The statement is addressed to the competent authorities with responsibility for insurance supervision in the European Union.
EIOPA acknowledges the potential benefit of run-off for the insurance market, enabling more efficient use of capital and orderly exits from lines of business. EIOPA however, says that the supervision of run-off is challenging – especially given the lack of specific regulation of run-off under the Solvency II framework. There has been a recent growth in run-off portfolios and growing interest in investor acquisitions, including from private equity firms.
In producing the Supervisory Statement, EIOPA is hoping to set out its expectations for the supervision of run-off undertakings in the context of: portfolio transfers, changes of ownership (acquisitions and mergers) and ongoing supervision. The Supervisory Statement covers a number of areas including the need for supervisors to understand a firm’s decision to go into run-off, the information requirements for firms acquiring a run-off portfolio or business, looking at the track record of private equity companies seeking to acquire run-off firms and setting expectations for conduct of business supervision.