The opinion published by EIOPA sets out principles to foster supervisory convergence in Europe and to ensure consistency in the authorisation process. These principles and strong statements from EIOPA have been published to a backdrop of claims that differing standards are being applied by regulators in member states, particularly in relation to matters such as head-count, retention of risk and corporate substance.
Some of the key points from the opinion are:
– EIOPA calls on all supervisors to have a sound authorisation process, and to increase resourcing if required to deal with the level of extra applications.
– No automatic recognition of existing authorisations should be granted.
– An appropriate level of corporate substance should be required of authorisations and companies should not display characteristics of an empty shell. The supervisors are instructed to scrutinise any transfer of risk carefully and require a minimum retention of risk from the authorised undertaking. An indicative minimum retention figure of 10% is mentioned.
– Outsourcing arrangements should not impair the governance and risk management of the company, and ultimate responsibility remains with the Board of Directors, irrespective of any outsourcing in place.
– EIOPA advises supervisory authorities to monitor companies post-authorisation and to conduct specific reviews in the first few years following authorisation to ensure consistency with the initial business model.
The full opinion and principles can be found on the EIOPA website here.
For more information on selecting locations and the authorisation process see our recent briefing note here.