On July 2, the European Insurance and Occupational Pensions Authority (EIOPA), in accordance with Article 29, paragraph 1, letter a) of Regulation (EU) 1094/2010, published an opinion on captive insurers con its website, with particular attention to intragroup operations and the application of the “prudent person principle”.
The document is addressed to the competent supervisory authorities to contribute to the convergence of supervisory expectations within the EU, and aims to facilitate the proportionate and risk-based supervision of captive insurance undertakings, hence undertakings held by the parent company to insure its own risks while benefiting from reduced costs (Art. 13, paragraph 2 and 5 of the Solvency II-Directive).
In the opinion, EIOPA lines out multiple supervisory expectations in various areas, specifying, for example, that supervisory authorities should, inter alia, (i) ensure that the classification of activities as lending or otherwise is not arbitrary, and also (ii) guarantee that captive insurance undertakings comply with the prudent person principle by assessing the portfolio as a whole considering various parameters such as liquidity and availability.