EIOPA launched a consultation on the draft Opinion on the supervision of remuneration principles in the insurance and reinsurance sector.
This draft Opinion addressed to national supervisory authorities aims to enhance supervisory convergence by focusing on a set of remuneration principles. It provides guidance on how to challenge the application of the principles and focuses on a reduced scope of staff identified as potential higher profile risk-takers to promote a proportionate approach. The Opinion also identifies benchmarks that should trigger the supervisory dialogue and should not be seen as hard targets for the practical implementation of the remuneration principles.
The deadline for submission of feedback is Monday, 30 September 2019 at 23.59 hrs CET.
Summary
EIOPA noticed divergent practices emerging among member States (not specified in the consultation paper).
With this opinion EIOPA aims to introduce convergence on remuneration, by providing further details on elements that are left high-level in the Directive and delegated acts.
In particular, this relates to the “balance” between fixed and variable remuneration and the deferral of the payment of a “significant” part of the variable component.
The regulation already provides that:
- companies must have a remuneration policy that promotes sound and effective risk management and does not encourage risk-taking that exceeds the risk tolerance limits
- the variable and fixed components of the remuneration should be “balanced”
- the payment of a “substantial proportion” of the variable component should be deferred for no less than 3 years and aligned with the nature of business
- financial and non-financial criteria must be taken into account to measure performance
The key takeaways of this draft opinion are:
- a ratio of 50% fixed and 50% variable is considered as “balanced” and a higher share of variable should be investigated
- a deferral of 40% of the variable component is considered a “substantial proportion”
- 50% of the variable remuneration should be awarded in shares or equivalent “if proportionate and feasible”
- reporting: NSAs should collect qualitative and quantitative data either via the RSR or “a specific request”
- details are given on how performance should be assessed, examples of non-financial criteria and how they should be a significant part of the assessment framework
- all these indications should be subject to “a risk based approach and supervisory judgement” and market practices should be taken into account
IE final response to EIOPA’s consultation on draft opinion on supervision of remuneration principles
EIOPA consultation on remuneration – Insurance Europe response – IE format.pdf
EIOPA consultation on remuneration – Insurance Europe response – EIOPA template.pdf