Law360, London (March 18, 2020, 2:55 PM GMT) -- Europe’s insurance watchdog urged national regulators to take a flexible approach in intervening over the capital requirements of insurers, which face mounting losses from the coronavirus pandemic.
The European Insurance and Occupational Pensions Authority said on Tuesday that Solvency II laws, which govern the amount of money insurers are required to retain, contained a “ladder of supervisory intervention” that allowed for a pragmatic approach by regulators in the face of crises.
Ratings agencies have warned that volatility in the stock market could push insurers into heavy losses this year, with industry bodies calling for regulators to loosen capital requirements.
EIOPA said regulators could intervene at any stage between an insurer falling below the standard solvency capital requirements and the minimum required levels of capital.
“This allows for flexibility in cases of extreme situations, including measures to extend the recovery period of affected insurers,” EIOPA said in a statement.
“Nevertheless, insurance companies should take measures to preserve their capital position in balance with the protection of the insured,” it added.
The regulator said it would monitor the situation closely and would take “any measure necessary in order to mitigate the impact of market volatility to the stability of the insurance sector in Europe.”
EIOPA said it would also scale back its regulatory consultations and other work not directly relevant to the current pandemic. It also urged national regulators across Europe to take a “flexible” approach to companies that have yet to file financial reports for 2019.
The move came after the U.K.’s Financial Conduct Authority announced Tuesday it would reschedule most of its planned work and extend deadlines on many of its open consultations until Oct. 1.
“This will allow firms to focus on supporting their customers during this difficult period,” the FCA said.
The FCA, however, said it did expect companies to “actively manage their liquidity” and contact the authority immediately if they believe they will face difficulty.
--Editing by Tom Mudd.
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