IRSG Response to EIOPA Consultation Paper on Proportional Reinsurance with Features Reducing Commensurateness
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EIOPA's Insurance and Reinsurance Stakeholder Group (IRSG) supports making capital relief from proportional reinsurance commensurate with the risk actually transferred, but criticises a binary treatment. It warns that denying any risk-mitigating effect to treaties with variable commissions, loss corridors or loss limits would lead to over-capitalisation.
Key points
- These features are common, especially for smaller or less capitalised undertakings
- Asks to distinguish actually ceded risk from risk transfer tests under scenarios
- Proposes partial recognition of the risk-mitigating effect in the standard formula
Who is affected
Standard formula insurers, reinsurers and supervisors
Plain-language version
Reinsurance is insurance that insurers themselves buy to share risk, which lets them hold less capital. EIOPA, the EU watchdog for insurers and pension plans, is consulting on how much relief to allow when a contract limits the risk actually passed on. Its advisory group (IRSG) warns that denying it entirely would force firms, especially small ones, to hold too much capital.
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Summary produced with artificial intelligence from the official publication. It may contain errors: always check the original document.
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