Question ID: 1524
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 135
Status: Final
Date of submission: 12 Mar 2019
Question
With reference to Article 135 & Annex XII and the risk factor of 40% applying to Miscellaneous Financial Loss we would be grateful for your help in relation to our query.
We underwrite pet insurance business (mainly dog, cat and equine, majority being dog) which provides reimbursement of vet fees along with other ancillary benefits.
We note from Article 135 & Annex XII that "extended warranty insurance" is excluded within the scope of Miscellaneous Financial Loss" and therefore the risk charge of 40% does not apply.
We believe that pet insurance by its very nature is also excluded by this exemption.
We would be grateful if you could advise if our regulator, the Gibraltar Financial Services Commission have the authority to grant such an exemption.
We have discussed this with two large audit firms and they agree with our understanding that pet insurance should not be exposed to a 40% risk charge.
EIOPA answer
We appreciate your efforts in running a parallel between the risks charge that applies to different lines of business. However, the definition of "extended warranty insurance" in Annex XII of the Delegated Regulations is very specific and does not extend to pet insurance. In addition, under the current Solvency II framework there are no provisions to empower a NCA to grant an exemption to an undertaking from including the capital charge from a risk (sub)-module from the overall calculation of the Solvency Capital Requirement. Therefore, it would be expected that the undertaking include all relevant risk charges when calculating the solvency capital requirement.