Peer Review Report on the Supervision of the Prudent Person Principle under Solvency II

In accordance with its mandate, EIOPA regularly conducts peer reviews, working closely with National Competent Authorities (NCAs), with the aim of strengthening both the convergence of supervisory practices across Europe and the capacity of NCAs to conduct high-quality and effective supervision.

Based on EIOPA’s Peer review work plan 2023-2024, EIOPA performed a peer review on the supervision of the Prudent Person Principle (PPP) for insurance and reinsurance undertakings under Solvency II according to Article 30 of EIOPA Regulation.

EIOPA planned this review in light of the importance of investment activity for the insurance business model, including the identification of new types of investments or trends in investment strategies, and considering that the supervision of this principle-based requirement is often mentioned by NCAs as challenging, both in the assessment of compliance and in taking supervisory actions (when needed).

Considering the broad scope of the Prudent Person Principle (PPP) and the need to keep the peer review targeted, the review focused mainly on supervision of investments in non-traditional or more complex assets, including derivatives (above all in the case of their use for efficient portfolio management), and of assets backing unit-linked and index-linked (UIL) contracts where the risk is borne by policyholders.