The European Insurance and Occupational Pensions Authority (EIOPA) today published an Opinion on External Models/Data used for the calculation of Solvency II capital requirements.
The Opinion states that the national supervisory authorities (NSAs) may request any additional information from insurance companies using external models/data in order to assess whether these companies comply with Solvency II requirements for capital. Some insurance companies intend to use external models/data obtained from a third party for the internal models that they use to calculate their Solvency Capital Requirement. However, in case such a company fails to provide all the information necessary for the appropriate assessment of the model, the supervisor should reject its internal model application.
EIOPA is aware that this provision has raised concerns among vendors of external models/data that the specificities and characteristics of their models will not be confidentially treated during the supervisory review process. In this regard the Opinion states that even if the contract between a vendor and an insurance company
foresees confidentiality provisions, the company still will be obliged to provide all the necessary information about its external/data models to the supervisor. Contractual conditions with the vendors of external data/models cannot justify the company’s refusal to demonstrate that its external model/data fulfill all the mandatory requirements.
In the Opinion EIOPA emphasizes that confidentiality provisions are already applied to supervisors under the current regulatory regime (Solvency I). And the upcoming Solvency II framework also foresees that persons working for EIOPA and NSAs as well as auditors and experts acting on behalf of NSAs, are bound by the obligation of professional secrecy.
Gabriel Bernardino, Chairman of EIOPA, said: “This is the first EIOPA Opinion but we plan to further use such a tool. EIOPA opinions are addressed to the national supervisory authorities and represent an efficient instrument designed to promote common supervisory approaches and practices in the European Union”.
The Opinion of EIOPA is part of its own initiative work on pre?application and represents a result of discussions with vendors, insurance companies and other relevant stakeholders on the use of external models and data.
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