FIG Bulletin Recent developments 4 October 2019

General 4

BoE cyber simulation exercise 4

PRA PS21/19: Responses to CP13/19 Occasional Consultation Paper 4

SMCR: PRA PS20/19 on resolution assessments and reporting 5

FCA Handbook Notice 69 5

Brexit 7

No-deal Brexit: FCA updates Brexit temporary transitional directions 7

No-deal Brexit: Ofgem letter on REMIT contingency arrangements 8

Hogan Lovells Brexit resources 8

Banking and Finance 9

Mortgage reporting requirements: FCA PS19/23 and PRA PS22/19 9

Asset encumbrance: PRA CP24/19 9

SSM: ECB consolidated guide to internal models 10

EBA 2020 work programme 10

Credit institutions and post-crisis regulatory reforms: ESRB board meeting discussion 11

Securities and Markets 12

MiFIR CFD and binary options product intervention: ESMA call for evidence 12

CSDR: ESMA updates Q&A 12

EMIR: ESMA updates Q&A on data reporting 12

MiFID II: ESMA updates Q&A on transparency and market structures 12

MMFs and securitisation regulation: IOSCO update on 2015 peer reviews 13

New Prospectus Regulation: ESMA guidelines on risk factors 13

ESMA 2020 work programme 13

Sustainability: EU technical expert group final report on EU climate benchmarks 14

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Distributing complex financial products: IOSCO thematic review report on suitability requirements 14

Insurance 16

Solvency II: PRA CP23/19 on modelling of IPRE loans and internal credit assessments for illiquid, unrated assets 16

Solvency II: PRA PS19/19 on equity release mortgages (Part 2) 16

Sustainability within Solvency II: EIOPA opinion 16

Solvency II: Insurance Europe and AMICE call to improve application of proportionality principle 17

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General

BoE cyber simulation exercise

The Bank of England (BoE) has published the high level findings of the financial sector cyber simulation exercise that took place on 9 November 2018 (SIMEX 18). The exercise explored the sector's resilience to a major cyber incident impacting the UK and involved UK financial authorities along with 29 of the most systemically important firms and financial market infrastructures.

The BoE states that the exercise demonstrated that recommendations from the last sector exercise have been implemented, but it also identified further opportunities for improvement.

The exercise found:

• opportunities to improve the way firms coordinate at an operational level during incidents that impact the sector;

• that disparity in risk tolerance for suspending services could impact the functioning of the financial sector;

• the recovery of services is impacted by differences in the way data is stored across the financial sector; and

• effective and consistent communications are key to maintaining customer and market confidence.

Specific recommendations linked to the 2018 exercise key themes will be taken forward by the participants and authorities.

PRA PS21/19: Responses to CP13/19 Occasional Consultation Paper

The Prudential Regulation Authority (PRA) has published a policy statement, PS21/19, giving feedback to responses to consultation paper (CP) 13/19 "Occasional Consultation Paper". It also includes the final rules, updated supervisory statements (SS), and relevant templates and LOG files. PS21/19 is relevant to a variety of PRA-regulated firms.

In CP13/19, the PRA proposed to:

a) update SS3/15 "Solvency II: The quality of capital instruments" to reflect changes in the Solvency II Regulations which came into effect on 10 July 2019;

b) delete extraneous and historical material from SS8/14 and SS2/15 to align them with the current format and bring them up to date;

c) discontinue the FSA006 return, deleting this from the Regulatory Reporting part of the PRA rulebook and deleting any references to this from SS34/15 "Guidelines for completing regulatory reports"; and

d) make minor updates, corrections and clarifications to NSTs, NST LOG files, internal model output templates and LOG files, and a related SS25/15 "Solvency II: Regulatory reporting internal model outputs".

The revisions in PS21/19 that relate to paragraphs a), b) and c) come into force on 30 September 2019. The revisions relating to paragraph d) come into force on 30 November 2019.

The PRA webpage for the policy statement provides links (in the appendices to PS21/19) to the final rules amending the relevant parts of the PRA Rulebook, final SSs, final templates and LOG files. Changes are made to:

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• SS3/15 "Solvency II: The quality of capital instruments" • SS8/14 "Subordinated guarantees and the quality of capital for insurers" • SS2/15 "Solvency II: Own funds" • Reporting Part of the PRA Rulebook • SS34/15 "Guidelines for completing regulatory reports" • National Specific Templates (NSTs), internal model output templates and associated

LOG files: o Reporting Part of the PRA Rulebook o SS25/15 "Solvency II: Regulatory reporting internal model outputs" o National Specific (NS.07) template o National Specific (NS.08) template o National Specific Templates LOG files o Internal model output (IM.00) template o Internal model output (IM.00) LOG file o Internal model output (IM.03) template o Internal model output (IM.03) LOG file

SMCR: PRA PS20/19 on resolution assessments and reporting

The PRA has published a policy statement, PS20/19, on "Strengthening individual accountability: Resolution assessments and reporting amendments".

In PS20/19, the PRA sets out feedback to its June 2019 consultation paper (CP12/19) on changes to the prescribed responsibility (PR) for recovery and resolution under the senior managers and certification regime (SMCR). The PRA consulted on amendments to the Allocation of Responsibilities Part of its Rulebook so that the senior manager who is assigned the PR for recovery plans and resolution packs would have an additional equivalent responsibility for resolution assessments. This amendment would be applicable only to firms with £50 billion or more in retail deposits on an individual or consolidated basis.

The PRA intends to proceed with the proposals set out in CP12/19, with minor amendments.

The appendices to PS20/19 contain:

• PRA Rulebook: CRR Firms: Non CRR Firms: Solvency II Firms: Non Solvency II Firms: Allocation of Responsibilities and Notifications Instrument 2019 (PRA 2019/17). This amends the Allocation of Responsibilities Part of the PRA Rulebook and makes consequential amendments to other Parts relating to the SMCR;

• a revised version of the PRA's SS on strengthening individual accountability in banking (SS28/15); and

• a revised version of the statement of responsibilities (SoR) form, reflecting the change to the PR.

These changes take effect from 9 December 2019.

FCA Handbook Notice 69

The Financial Conduct Authority (FCA) has published Handbook Notice 69, which sets out changes made by the FCA board to the FCA Handbook on 26 September 2019.

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The Handbook Notice summarises changes made to the Handbook by the following instruments:

• Handbook Administration (No 51) Instrument 2019 (FCA 2019/85), which makes a number of minor changes to various modules of the FCA Handbook. The FCA has not consulted on them separately as they are minor amendments that correct or clarify existing provisions and do not represent any change in FCA policy. The changes came into force on 27 September 2019, with the exception of changes to:

o the Collective Investment Schemes sourcebook (COLL), which came into force on 30 September 2019, following the entry into force of the Collective Investment Schemes Sourcebook (Miscellaneous Amendments) Instrument 2018 (FCA 2018/17); and

o the Fit and Proper test for Employees and Senior Personnel (FIT), which will come into force on 9 December 2019, following the entry into force of the Individual Accountability (FCA-Authorised Firms) Instrument 2019 (FCA 2019/81).

• Waiver Application Form (Amendments) Instrument 2019 (FCA 2019/87), which makes changes to a Handbook form in chapter 8 of the Supervision manual (SUP) at SUP 8 Annex 2D (Application form for a waiver or modification of rules) to make it consistent with current data protection legislation. This instrument came into force on 30 September 2019.

• Reporting of Changes to the Management Body (FCA-Authorised Firms) Instrument 2019 (FCA 2019/89), which makes changes to the Senior Management Arrangements, Systems and Controls sourcebook (SYSC) and SUP to ensure that solo-regulated and optional exemption MiFID firms can continue to comply with MiFID and CRD requirements after the extension of the SMCR. The instrument comes into force on 9 December 2019.

• Non-UCITS Retail Schemes Investing in Illiquid Assets Instrument 2019 (FCA 2019/90), which makes changes to reduce the potential for harm to investors in funds that hold inherently illiquid assets, particularly under stressed market conditions. It comes into force on 20 September 2020.

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Brexit

No-deal Brexit: FCA updates Brexit temporary transitional directions

The FCA has published updated draft directions under its temporary transitional power (TTP). The TTP gives the FCA flexibility in applying post-Brexit requirements, allowing firms to transition to a new UK regulatory framework. The directions would come into effect on exit day only if the UK leaves the EU without an implementation period. The updated directions replace those published on 28 March 2019. The FCA has also updated its explanatory note providing guidance on the use of the TTP.

The FCA reminds firms that there are specific areas for which it will not be granting transitional relief. In these areas, the FCA expects firms and other regulated entities to take reasonable steps to comply with the changes to their regulatory obligations by exit day.

The directions updated (with changes tracked against the versions made on 28 March 2019) are:

• Draft Transitional Direction; • Draft Prudential Transitional Direction; • Draft Annex A – application of the "standstill" in the Transitional Direction to

amendments made in Statutory Instruments and Exit Instruments amending technical standards; and

• Draft Annex B – application of the "standstill" in the Transitional Direction to amendments made in the FCA Handbook.

The FCA describes the updates as:

• extending the proposed duration of the directions issued under the TTP from 30 June 2020 to 31 December 2020;

• updating the provisions relating to prudential requirements to reflect new HM Treasury legislation and FCA exit instruments published since 29 March 2019;

• revoking certain directions in relation to payment services, provided by EEA credit institutions in the financial services contracts regime, as these are no longer needed because of legislative amendments made by the Government; and

• applying the standstill direction to allow EEA central banks and the European Central Bank (ECB) to continue to rely upon their status as exempt persons for the duration of the transitional relief.

The FCA does not expect to make further changes to the directions. It notes that it has made the directions on the basis that two outstanding statutory instruments (Sis) will be made before exit day:

• the Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment etc., and Transitional Provision) (EU Exit) (No 2) Regulations 2019; and

• the Financial Services (Miscellaneous) (Amendment) (EU Exit) (No 3) Regulations 2019.

The FCA may revise the directions if these SIs are not made, or there is a delay in making them.

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No-deal Brexit: Ofgem letter on REMIT contingency arrangements

Ofgem (the Office of Gas and Electricity Markets) has published a letter on the contingency plans for how the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) will apply in the UK if it leaves the EU without a withdrawal agreement.

As part of its contingency planning, on 4 December 2018, Ofgem published a letter titled "No-deal EU exit REMIT contingency arrangements". This was followed on 1 March 2019 by a second letter, "No-deal EU exit REMIT contingency arrangements – Update". The purpose of this further letter is to summarise the no-deal EU exit REMIT contingency arrangements set out in the March 2019 letter and to confirm to wholesale energy market participants that those contingency arrangements remain valid as 31 October 2019 approaches.

Hogan Lovells Brexit resources

Given the moving Brexit target at the moment we recommend that for an up-to-date take on Brexit impact please try the Hogan Lovells Brexit Hub an open resource online.

Hogan Lovells Brexit Hub

Twitter

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Banking and Finance

Mortgage reporting requirements: FCA PS19/23 and PRA PS22/19

The FCA and the PRA have published a policy statement, FCA PS19/23 and PRA PS22/19, on changes to mortgage reporting requirements for regulated mortgage lenders and home finance administrators. The policy statement follows a consultation on this issue published in December 2018 (FCA CP18/41 and PRA CP30/18).

Overall, respondents supported the proposals and they are being implemented broadly as consulted on. However, in response to feedback received, the regulators are extending the implementation time for implementing the changes to the product sales data report (PSD001) to 18 months.

Appendix 1 to the policy statement contains the Mortgages (Regulatory Reporting) Instrument 2019, which sets out the FCA's final rules amending SUP. Part 1 of the Annex to the instrument comes into force on 1 October 2020, Part 2 on 1 January 2021 and Part 3 on 1 April 2021.

Appendix 2 to the policy statement contains the PRA Rulebook: Regulatory Reporting (Mortgage Reporting) Amendment Instrument 2019, which sets out the PRA's final rules amending the Regulatory Reporting Part of the Rulebook. Annex A to the instrument comes into force on 1 October 2020 and Annex B comes into force on 1 April 2021.

Alongside the policy statement, the PRA has published updated versions of the following documents:

• MLAR form (in force from 1 October 2020); • Notes for completion of the MLAR (in force from 1 October 2020); and • SS34/15 on guidelines for completing regulatory reports. Chapter 2 and Appendix 1 have

been updated to reflect the deletion of the FSA006 report. Appendix 2 has been updated to add a link to the updated notes for completion of the MLAR. The amendments take effect on 1 October 2020.

The FCA plans to publish the technical documents (Data Reference Guide) in October 2019 and to make a GABRIEL testing environment available to firms from November 2019. It will also review the FCA’s website FAQs and make any necessary changes.

Asset encumbrance: PRA CP24/19

The PRA has published a consultation paper, CP24/19, setting out its proposed expectations of firms when managing prudential risks associated with asset encumbrance, specifically in the contexts of managing liquidity and funding risks, recovery planning, and resolution. CP24/19 is relevant to all PRA-authorised firms, except credit unions and insurance firms.

The PRA states that encumbered assets are those which are pledged or otherwise committed to counterparties to secure, collateralise or credit-enhance a transaction, such that the assets cannot be freely transferred, withdrawn, liquidated, sold or disposed. The counterparties to which the assets are pledged, such as secured creditors, have prior claim on encumbered assets in the event of insolvency.

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The PRA's proposed expectations relate to:

• firms' internal monitoring and management of these risks; and • the information that firms are expected to provide to the PRA through their periodic

regulatory submissions, e.g. Internal Liquidity Adequacy Assessment Process (ILAAP) documents and recovery plans.

The proposals relate to the following parts of the PRA Rulebook:

• Internal Liquidity Adequacy Assessment (ILAA); • Recovery Planning; and • Resolution Pack.

The PRA proposes to amend the following SSs:

• SS24/15 "The PRA’s approach to supervising liquidity and funding risks"; • SS9/17 "Recovery planning"; and • SS20/15 "Supervising building societies’ treasury and lending activities".

The consultation closes on 17 January 2020.

The PRA says that it also plans to enhance its monitoring of firms' asset encumbrance levels and the amounts of liquidity that they might be able to generate from unencumbered assets in a stress situation.

SSM: ECB consolidated guide to internal models

The ECB has published the consolidated version of its guide to internal models under the single supervisory mechanism (SSM).

Under the Capital Requirements Regulation (CRR), credit institutions are permitted to use internal models for credit risk, counterparty credit risk and market risk where the requirements set out in the corresponding chapters of the CRR are met by the credit institutions. The ECB guide explains how the ECB understands those rules and how it intends to apply them when assessing whether institutions meet these requirements.

The guide is also intended to be used by different supervisory teams, with the aim of ensuring a common and consistent approach to matters related to internal models. When applying the relevant regulatory framework in specific cases, the ECB will consider the particular circumstances of the institution concerned.

EBA 2020 work programme

The European Banking Authority (EBA) has published its work programme for 2020. The work programme describes and summarises the main objectives, priorities and deliverables of the EBA in the forthcoming years.

The EBA's work for 2020 is defined under six strategic areas and 37 activities. The six strategic areas for 2020 are:

• support the development of the risk reduction package and the implementation of the global standards in the EU;

• providing efficient methodologies and tools for supervisory convergence and stress testing;

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• moving towards an integrated EU data hub and a streamlined reporting framework; • making anti-money laundering (AML) a real priority for the EU; • contributing to the sound development of financial innovation and sustainability; and • promoting an operational framework for resolution.

It also has two horizontal priorities for policy work:

• ensuring effective cooperation with third countries; and • improving a culture of good governance in financial institutions.

The 37 activities are described in the work programme which includes their expected results and main outputs.

Credit institutions and post-crisis regulatory reforms: ESRB board meeting discussion

The European Systemic Risk Board (ESRB) has published details of its board meeting on 26 September 2019. Among the topics for discussion were issues related to the exchange and collection of information on branches of credit institutions for macroprudential purposes, and the post-crisis regulatory reforms.

The ESRB has also published its risk dashboard, setting out quantitative and qualitative indicators of systemic risk in the EU financial system.

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Securities and Markets MiFIR CFD and binary options product intervention: ESMA call for evidence

The European Securities and Markets Authority (ESMA) has launched a call for evidence on the effects of product intervention measures under the Market in Financial Instruments Regulation(MiFIR) regarding contracts for differences (CFDs) and binary options on market participants and clients.

The deadline for responses is 4 November 2019. ESMA will consider the responses to the call for evidence when preparing a response to the Commission following its call for evidence.

CSDR: ESMA updates Q&A

ESMA has updated its Q&As regarding practical issues on the implementation of the Central Securities Depositories Regulation (CSDR).

The updated Q&As clarify the scope of the cash penalties regime and, more precisely, the exemption applicable to insolvent participants. In particular, ESMA specifies that it applies only to settlement fails caused by that participant or to those relating to the liquidation of its position.

EMIR: ESMA updates Q&A on data reporting

ESMA has updated its Q&As on practical questions regarding data reporting issues, stemming from the European Market Infrastructure Regulation (EMIR).

ESMA states that the updates clarify:

• OTC Question 2(h) on when counterparties that start taking positions in OTC derivatives need to notify the relevant national competent authorities and ESMA;

• OTC Question 4 on whether counterparties not subject to the clearing obligation should also obtain representation;

• OTC Question 13 on how a counterparty should determine whether an entity established in a third country would be an FC+/- or NFC+/- if it was established in the EU;

• TR Question 14 on how the derivatives should be reported in the scenario where a clearing member defaults and a CCP temporarily assumes both sides of the outstanding transactions;

• TR Question 17 on how to populate the fields "Trading Venue" and "Compression" for derivatives reported at position level; and

• TR Question 53 on how to report derivatives based on €STR and other benchmarks that are not explicitly captured by the EMIR implementing technical standards (ITS).

MiFID II: ESMA updates Q&A on transparency and market structures

ESMA has updated its Q&As regarding transparency and market structures issues under the Market in Financial Instruments Directive (MiFID) and MiFIR (together, MiFID II). The updated Q&A:

• for transparency issues clarifies that for exchange-traded funds there is only one average daily turnover band from which to choose the highest threshold to be used to calculate the average value of transactions; and

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• for market structures issues clarifies how to interpret the application of the tick size regime to periodic auctions.

MMFs and securitisation regulation: IOSCO update on 2015 peer reviews

The International Organization of Securities Commissions (IOSCO) has published two reports providing updates on its 2015 peer reviews of the regulation of money market funds (MMFs) and on the implementation of incentive alignment recommendations for securitisation.

The reports describe progress by IOSCO members in Financial Stability Board (FSB) jurisdictions in adopting legislation, regulation and other policies covering MMFs and securitisation, which are G20 priority reform areas.

The MMF report covers valuation, liquidity management, and MMFs that offer a stable net asset value. IOSCO states that most jurisdictions have implemented the fair value approach for the valuation of MMF portfolios, but progress in liquidity management is less advanced and less even.

The securitisation report covers incentive alignment arrangements and disclosure requirements. IOSCO found that, overall, progress remains mixed across participating jurisdictions in implementing the recommendations for incentive alignment for securitisation.

The reports also take note of new regulations yet to come into force or to be applied in various jurisdictions. IOSCO says that this is an indication that implementation of its recommendations may be more complete in future implementation monitoring exercises.

New Prospectus Regulation: ESMA guidelines on risk factors

ESMA has published its final guidelines on risk factors under Article 16(4) of the new Prospectus Regulation (Regulation 2017/1129), which will come into effect on 1 December 2019.

The guidelines aim to encourage appropriate, focused and more streamlined disclosure of risk factors.

Amendments to the draft guidelines published in March include the insertion of 1 December 2019 as the date from which the guidelines will apply, and minor drafting amendments, but they are otherwise unchanged.

ESMA 2020 work programme

ESMA has published its work programme for 2020, setting out its priorities and areas of focus for the next 12 months.

Following the conclusion of the review of the European Supervisory Authorities (ESAs), the key issue facing ESMA in 2020 is the implementation of its new mandates, and enhanced role, in areas including direct supervision, supervisory convergence, investor protection, relations with third countries, sustainability and technological innovation.

It will also continue to prioritise its response to the risks and challenges posed by Brexit. This work could potentially have an impact on its other planned priorities.

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Sustainability: EU technical expert group final report on EU climate benchmarks

The EU technical expert group on sustainable finance (TEG), a stakeholder group designed to assist the European Commission in developing elements of green finance policy, has published its final report on climate benchmarks and benchmarks' environmental, social and governance (ESG) disclosures. The TEG has also published a summary of the final report.

The TEG report stems from the 2018 EU Action Plan on Sustainable Finance and follows up on the agreement by the European Parliament and member states on a new generation of low-carbon benchmarks needed to help boost investment in sustainable projects and assets.

The TEG recommends a set of minimum technical requirements for the methodology of EU climate benchmarks. These would help investors to make informed, "green" investment decisions should they wish to. They would also address the risks of greenwashing, the practice of financial products being marketed as "green" or more generally "sustainable", when in fact they do not meet basic environmental standards.

In addition, the TEG recommends a set of ESG disclosure requirements for benchmark administrators, including disclosure on alignment with the Paris agreement.

The report will inform the preparation of delegated acts by the Commission under the proposed Regulation amending the Benchmarks Regulation on low carbon benchmarks and positive carbon impact benchmarks (Low Carbon Benchmarks Regulation), which is expected to be adopted by the Council of the EU, and published, by the end of 2019. The delegated acts will be subject to a formal consultation and are expected to be adopted by mid-2020.

Distributing complex financial products: IOSCO thematic review report on suitability requirements

IOSCO has published a final report on the findings from a thematic review on suitability requirements with respect to the distribution of complex financial products.

The review involved 29 IOSCO members from developed and emerging market jurisdictions, and assessed the implementation of the nine Principles set out in the 2013 IOSCO report, Suitability Requirements with respect to the Distribution of Complex Financial Products. The Principles focus on the application of suitability and related disclosure requirements to intermediary services, including selling, advising, recommending and managing discretionary accounts or portfolios, as well as the regulator's role in supervision and enforcement.

IOSCO's findings included that the majority of participating jurisdictions have implemented suitability requirements generally in line with the Principles, that most jurisdictions have standards for dealing with customers fairly, and that the robustness of suitability regimes appears to correlate to levels of market development and participation. However, most jurisdictions did not have bespoke requirements specifically for complex products and there were differences in what constituted a complex financial product.

IOSCO recommends that jurisdictions should, among other things, consider:

• reviewing whether their suitability regimes address complex products specifically or are sufficiently sensitive to products of increasing complexity. Where jurisdictions apply bespoke requirements for complex products, they should establish clear criteria to aid intermediaries in distinguishing complex products from non-complex products;

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• incorporating further consideration of product knowledge and experience into customer classification decisions concerning non-retail customers;

• enhancing disclosure requirements to ensure that customers have sufficient information on which to base informed investment decisions and to understand the advice they receive from intermediaries;

• reviewing whether their regimes provide sufficient direction on the product due diligence element of the suitability assessment process; and

• making regular use of supervisory tools across all intermediaries that provide complex products and to ensure that intermediaries take corrective action where their behaviour falls short of expectations.

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Insurance Solvency II: PRA CP23/19 on modelling of IPRE loans and internal credit assessments for illiquid, unrated assets

The PRA has published a consultation paper, CP23/19, on the modelling of income producing real estate (IPRE) loans and internal credit assessments for illiquid, unrated assets under the Solvency II Directive.

CP23/19 sets outs the PRA's proposed expectations of firms in respect of their modelling of IPRE loans within their Solvency II internal models. It also proposes amendments to the PRA's expectations in respect of the use of internal credit assessments for assigning fundamental spreads for illiquid, unrated assets.

The proposals would result in changes to SS3/17: Solvency II: Matching adjustment – illiquid unrated assets and equity release mortgages. The PRA is also proposing to change the name of this SS to "SS3/17: Solvency II: Illiquid unrated assets" to reflect the proposed expansion of its scope.

The consultation ends on 27 December 2019. The proposed implementation date for the changes is 31 March 2020.

Solvency II: PRA PS19/19 on equity release mortgages (Part 2)

The PRA has published a policy statement, PS19/19, providing feedback on its second consultation paper on equity release mortgages (ERMs) and the Solvency II Directive (CP7/19), together with an updated version of SS3/17: Solvency II: Matching adjustment — illiquid unrated assets and equity release mortgage. The policy statement is relevant to insurance and reinsurance companies holding ERMs.

The PRA has made some changes to the draft SS after considering responses to the consultation and further analysis.

The updated SS3/17 will come into effect on 31 December 2019, superseding the version of SS3/17 published in December 2018 that was due to come into effect on the same date.

The FCA also published a document setting out the values of the deferred rate and volatility parameters used in the effective value test (EVT) (as set out in SS3/17) that, following a review by the PRA, have been updated. The parameters in the document will apply from 31 December 2019. The minimum deferment rate used in the EVT will be reduced from 1% to 0.5% per annum, while the PRA has decided to retain a value of 13% per annum for the volatility parameter. The PRA explains the EVT parameters in a newly published webpage.

Sustainability within Solvency II: EIOPA opinion

EIOPA has published an opinion, addressed to the European Commission, on sustainability and Solvency II. The opinion follows a request for the opinion by the Commission. The opinion addresses the integration of climate-related risks in Solvency II Pillar I requirements.

The Commission will take the opinion into account in the preparation of its report on the Solvency II Directive, which is due by 1 January 2021.

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Solvency II: Insurance Europe and AMICE call to improve application of proportionality principle

Insurance Europe and AMICE (the Association of Mutual Insurers and Insurance Co-operatives in Europe) have published a joint call for the European Commission to improve the use of the principle of proportionality in Solvency II. It notes that the industry reports little or no application of proportionality in practice.

They welcome that the Commission has requested EIOPA, in its call for advice on the Solvency II 2020 Review, to assess whether proportionality in the application of the Solvency II framework could be enhanced. Accordingly, Insure Europe and AMICE have developed a series of recommendations designed to ensure that proportionality works in practice.

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