Decision of the European Systemic Risk Board of 14 November 2018 on a coordination framework for consultation by a supervisory authority with the European Systemic Risk Board on an extension of the period under Article 138(4) of Directive 2009/138/EC of the European Parliament and of the Council (Solvency II) (ESRB/2018/7)

This Decision establishes a common procedural framework for the consultation of the ESRB by a requesting authority on the extension of the recovery period under Article 138(4) of Directive 2009/138/EC.

For the purposes of this Decision, the following definitions shall apply: (1) ‘assessment team’ means the team of experts of the ESRB responsible for performing an assessment and drafting a response to a request for consultation, which is a substructure of the Advisory Technical Committee; (2) ‘Darwin’ means the internal document management system of the ESRB; (3) ‘ECB working day’ means any day other than a Saturday, a Sunday or a public holiday in the ECB; (4) ‘insurance undertaking’ means an insurance undertaking as defined in Article 13 of Directive 2009/138/EC; (5) ‘recovery period’ means, in respect of an affected undertaking, the period referred to in Article 138(4) of Directive 2009/138/EC within which that undertaking must achieve the re-establishment of its level of eligible own funds covering the Solvency Capital Requirement or the reduction of its risk profile to ensure compliance with the Solvency Capital Requirement; (6) ‘reinsurance undertaking’ means a reinsurance undertaking as defined in Article 13 of Directive 2009/138/EC; (7) ‘request for consultation’ means a consultation addressed to the ESRB by a supervisory authority under Article 138(4) of Directive 2009/138/EC; (8) ‘requesting authority’ means a supervisory authority submitting a request for consultation; (9) ‘supervisory authority’ means a supervisory authority as defined in Article 13 of Directive 2009/138/EC.

1 Once a request for consultation has been received pursuant to Article 138(4) of Directive 2009/138/EC, the ESRB Secretariat shall immediately notify the members of the General Board, the Steering Committee and the assessment team via Darwin of such request.

2 Within ten ECB working days following the request for consultation, the assessment team shall prepare a draft response to the request for consultation which shall be submitted by the ESRB Secretariat to the Steering Committee for consideration via written procedure.

3 Within the timeline referred to in the previous paragraph, a member of the General Board may indicate, within the first two ECB working days following the notification of General Board, that its authority would like to participate in the assessment team, as an observer, if it is not yet represented.

4 The Steering Committee shall provide comments on the draft response within two ECB working days following its submission by the ESRB Secretariat. Substantial comments which have been provided by the Steering Committee shall be assessed by the assessment team and may be reflected in the draft response to the General Board.

5 Within four ECB working days following the date of submission of the draft response to the Steering Committee, the ESRB Secretariat shall submit the draft response to the General Board for comments. Within four ECB working days following the date of the submission of the draft response to the General Board, its members may provide comments prior to taking a General Board decision. In the absence of any substantial comments, the draft response to the request for consultation is deemed to be approved.

6 If substantial comments are provided by the General Board on the draft response, the assessment team shall consider whether the draft response should be revised in the light of those comments. Within four ECB working days of receipt of the comments from the General Board, the assessment team shall submit, via the ESRB Secretariat, the final draft response to the General Board.

7 Based on the final draft response prepared by the assessment team, the General Board shall take a decision on its approval. Unless a General Board meeting is convened in accordance with the Rules of Procedure of the ESRB , the decision by the General Board shall be taken by written procedure, within two ECB working days following the submission of the final draft response by the assessment team.

8 The timeline of the procedure for the response to the request for consultation may be shortened in exceptional circumstances on request by the requesting authority or if deemed necessary by the General Board.

9 In accordance with Articles 5(2a) and 13(7) of the Rules of Procedure of the ESRB, representatives of Iceland, Norway and Liechtenstein in the ESRB may be asked not to participate in the discussion of the draft response, unless the request for consultation has been submitted by the supervisory authority of their respective country.

1 A request for consultation shall contain all the necessary information on which the response provided by the ESRB will be based and it shall specify the confidentiality requirements, if any, which apply to the transmission of that information.

2 A requesting authority shall provide the ESRB with information explaining the economic reasons supporting the extension of the recovery period and the expected overall economic implications of not extending the recovery period.

3 The information on the economic reasons supporting the extension of the recovery period shall include: (a) data on the current financial situation and the interconnections of each affected insurance undertaking or reinsurance undertaking, including its investment exposures; (b) additional information on items such as the structure of the insurance market, the main characteristics of the competitors and the distribution of the losses following the adverse event; and (c) financial projections illustrating the potential recovery of each affected insurance undertaking or reinsurance undertaking under a set of different economic scenarios.

4 The information on the expected overall economic implications of not extending the recovery period shall include: (a) the adverse impact on financial markets of each affected insurance undertaking’s or reinsurance undertaking’s strategy to reduce its risk profile including possible second round effects; (b) the adverse impact on the real economy caused by, for example, among other things, a temporary disruption in insurance services as a result of the potential lack of substitutability or the possible negative effects on consumer confidence.

5 The Annex to the Decision details the minimum set of information to be provided by the requesting authority.

6 Notwithstanding paragraphs 4 and 5 above, the ESRB may require the requesting authority to provide further information if deemed necessary.

7 Unless the information provided is already in the public domain, the information received by the ESRB shall be deemed and treated as confidential, in accordance with Article 8(3) of Regulation (EU) No 1092/2010, and access to it shall be restricted to those persons and authorities that need to know in the course of their duties or performing their tasks.

8 The ESRB Secretariat shall set up a dedicated Darwin structure for information exchange with the requesting authority.

1 The assessment team shall perform an assessment and draft a response to a request for consultation.

2 The composition of the assessment team shall be the same as the assessment team created under Decision ESRB/2015/4 as appointed by the General Board with the following differences: a) the representative of the European Banking Authority (EBA) shall be replaced by a representative of EIOPA who will be appointed by the General Board; and b) each authority represented in the assessment team may indicate one insurance expert that will act as an observer in the assessment team.

3 To avoid conflicts of interest in the preparation of a response to a request for consultation, the status of assessment team members and observers shall temporarily cease, without those members being replaced, for representatives of a supervisory authority which is a requesting authority.

4 The assessment team shall strive to reach consensus among its members, but where circumstances so require, the assessment team may provide a majority and a minority view assessment with the draft response it submits to the General Board.

The ESRB’s response to a request for consultation shall not be public and shall be provided only to the requesting authority.

This Decision shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.