29 April 2008

CEA responds to consultation on proportionality

The principle of proportionality should apply to the calculation of capital requirements, to the review of the risk management and governance processes as well as to the disclosure requirements, CEA notes although further work is required.

CEA believes that proportionality is key for a successful implementation of Solvency II and expects that a large number of the insurance companies would want to apply this principle by using simplifications, for their business or parts of their business.

CEA also notes that capital requirements should be risk-based and not be unduly influenced by the size or legal form of the company. Accordingly, size thresholds alone should not dictate whether simplifications may be used in Pillar 1, but should instead be seen as a guide to be considered with other risk based, qualitative assessments.

The guidance on when to use simplified approaches needs to be clear, but a degree of flexibility is required and the interpretation of this principle must not be applied too rigidly, CEA notes.

Response on principle of proportionality

© CEA - Comité Européen des Assurances