EIOPA consults on the supervision of captive (re)insurers with a focus on intra-group transactions, the prudent person principle and governance

EIOPA has initiated a public consultation regarding the supervision of captive (re)insurance undertakings, with a particular focus on intra-group transactions, the prudent person principle, and governance. Captive insurers are unique entities that provide coverage exclusively to the group to which they belong. The consultation’s primary goal is to establish a risk-based and proportionate framework for supervising these insurers and to harmonize supervisory expectations across the EU.
The consultation paper addresses several key points. Firstly, it is intended for competent authorities responsible for supervising captive (re)insurance undertakings. Captive insurers, by nature, have specific characteristics that need to be considered when implementing regulatory measures. This consultation paper seeks to provide supervisory guidance that is proportionate to the specific business model of captive insurers, thereby creating a level playing field within the EU.
One important aspect covered in the consultation paper is cash pooling, a common practice among captive insurers. The consultation paper emphasizes that these arrangements should be accurately classified in the balance sheet and undergo proper risk assessments. This ensures that they maintain the necessary security, quality, liquidity, and profitability to meet regulatory requirements.
The consultation paper also addresses governance within these captive insurers, particularly focusing on the composition of the AMSB. It underscores the importance of having a qualified and experienced AMSB, regardless of the specialized nature of captive insurers. Furthermore, the consultation paper delves into the outsourcing of key functions, stipulating that while captive insurers can outsource certain tasks, there should be a designated person within the insurer who has overall responsibility for the outsourced function, meets fitness and propriety criteria, and possesses sufficient knowledge and experience.
This consultation paper will be monitored by EIOPA, and stakeholders are encouraged to provide feedback through an online survey by 5 January 2024.