QIS5: Process, timeline and main results

Press BriefingFrankfurt, 22 March 2011

2

Objectives of QIS5

• Commission’s Call for Advice (July 2010):o Quantitative impacto Check principles and calibration targetso Encourage (re)insurers and supervisors to prepare for the

introduction of Solvency IIo To provide a starting point for an ongoing dialogue

between supervisors and (re)insurers

• Also: EIOPA to test feasibility and assess complexity

3

QIS5 process

• Ownership of technical specifications: European Commission

• “Double” calculations (no default approach set by the EC)o Calculation with and without transitional provisions for discountingo Internal Models and Standard Formula calculationo Modular approach and equivalent scenario for the adjustment for the loss-absorbing

capacity of technical provisions and deferred taxes o Groups: accounting consolidation as well as aggregation and deduction method

• “Alternative” approaches: QIS5 to collect information to assess the impact of the issues and/or enable comparisons on potential alternatives (default defined by EC)

o Value of participations based on SCR of the undertaking in which the participation is held

o Introduction of the illiquidity premium in risk free rateo Risk margin

- with diversification between lines of business (solo)- without diversification between entities at group level

o Transitional provisions for own funds o Tiering of expected profits in future premiums

• EIOPA and Commission verifying national guidance

19 April 2023 4

QIS 5 timeline

Jan. 2010 Mar. 2011

Apr. 2010

Jul. 2010

Aug. 2010

Nov. 2010

Jan. 2011

Draft technical specifications

Running of the exercise

European Report

Consultation technical

specifications

National analysis /

quality check

220 Q&A220 Q&A

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QIS 5 was a field test!

“On the one hand, the quantitative results of QIS5 allow identifying major trends and

drawing conclusions about the “big picture”.

On the other hand, supervisors consider that the detail of the quantitative results should

be treated with caution.”

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Participation solo

• Participation rate

Solo Target (set by EC) Results

QIS4 QIS5 QIS4 QIS5

25% 60% 33% 68%

More than doubled solo participationMore than doubled solo participation

• 1511 Small• 791 Medium• 217 Big

• 382 Health• 454 Mutual

• 610 Life• 1284 Non-Life• 111 Reinsurers• 175 Captives• 336 Composites

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Surplus evolution

Explanation of solo surplusevolution

Graph 8: Drivers of the surplus changes - EEA

-25%

0%

25%

50%

75%

100%

125%

150%

Surplus SI100.0%

Assets--37.6%

Assets+30.9%

Other valuation-3.5%

TP--14.9%

TP+66.0%

Tax-15.2%

Own funds9.1%

Capital reqs-58.8%

QIS576.0%

19 April 2023 9

Groups: QIS4: 106

QIS5: 167

Groups: QIS4: 106

QIS5: 167

Increase in number of small and medium groups

Increase in number of small and medium groups

EEA groups without non-EEA

entities

EEA groups with non- EEA

entities

EEA subgroup(s) of

non-EEA groups

Number 121 41 5

Large Medium Small

Number 17 23 127

Participation groups

Group surplus

(Billions euro) Surplus Solvency I Surplus QIS5 Size sample

Results in case internal models were approved and/or local rules under D&A for third countries were used

Large 109 129 17

Medium 27 18 21

Small 64 50 109

All 200 197 147

Consolidated method with standard formulaLarge 109 54 17

Medium 27 16 21

Small 64 44 108

All 200 114 146

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Conclusions

• Industry remains overall well capitalised

• Need to reduce complexity

• Further work needed to improve calibration (e.g. in non life underwriting or catastrophe risks)

• 3 areas identified where transitionals will make full sense: equivalence, hybrids and technical provisions

• EIOPA to undertake development of Technical Standards and Guidelines to ensure a consistent implementation and enhance practicability and feasibility

Thank you

For questions, please contactSybille Reitz, EIOPA Press Officepress@eiopa.europa.eu

Perrine Kaltwasser, EIOPA, QIS5 TF leader