EIOPA published its annual report on the use of capital add-ons during 2020 under SII.
The analysis included in the report is based on 2020 year-end data collected under Solvency II as reported by the solo undertakings or insurance groups from the EEA , and complemented by a dedicated survey for NCAs that entailed both qualitative and quantitative questions.
According to EIOPA:
- During 2020, two NCAs that set capital add-ons in the previous years no longer set capital add-ons in 2020, and this situation led to a number of capital add-ons set at the end of 2020 even lower than in 2019.
- In 2020 seven NCAs set capital add-ons to nine solo undertakings (six non-life and three life undertakings respectively), while in 2019 nine NCAs had set capital add-ons to ten solo undertakings, including two life, seven non-life undertakings and one composite (excluding the capital add-ons set by the UK in the past).
- For groups, similarly to 2019, no capital add-ons were set during 2020.
- Due to the low number of capital add-ons, the weight of capital add-ons imposed on undertakings using the standard formula remains very low overall in 2020 (i.e. less than 0.1% of the total Solvency Capital Requirement of all undertakings). However, it remains significant when considering the amount at individual level accounting for 25% of the total SCR of the undertakings with capital add-ons.
- Although there is a wide range in its distribution (from 86% to 1%), in all cases (except for one) the capital add-on increases the SCR by at least 10%.
- Following the findings of the survey, in view of a decreasing number of capital add-ons at an already low level, EIOPA will continue to monitor the usage of capital add-ons and pay particular attention on the proposals made by NCAs on how to make a more efficient use of this tool in the future.
For more information, please see here.
The secretariat of Insurance Europe prepared a high level summary.