ECIROA
Günter Dröse of ECIROA tells CIT about Solvency II and captive owners
What are ECIROA’s plans for 2013?
The European Captive Insurance and Reinsurance Owners` Association (ECIROA) will take advantage of the delay in the introduction of Solvency II to continue our discussions with local regulators. We strongly recommend that captives take this opportunity to ensure they will be in compliance in the future. We are confident that most captives are in good shape for the Pillar I requirements and the few that are not may need to change their strategies. With regards to Pillar III, ECIROA as an industry body, as well as individual captive owners, need to contact their local supervisors to discuss the way forward for their specific captive and to understand what is expected to get approval based on the principle of proportionality (PoP).
The PoP delivers the argument to treat each and every captive individually. Captive owners must come to their local supervisors with their ideas of how their captive can fulfill the Pillar II requirements in a proportionate way. ECIROA has drafted a best-practice document that can be used as a guideline to help them achieve this. The majority of captives already follow good governance principles so it is just a question of documenting them.
For each country, we need to know what the perception of the local regulator is and how much flexibility will be shown to follow, on the one side, the unavoidable requirements of Solvency II (eg, under Pillar I), and on the other side, the recognition of the specificities of the captive to achieve and fulfill the targets of Solvency II.
With regards to Pillar III, ECIROA is working on a bespoke set of templates for captive owners, with the assistance of Aon, Marsh and Willis. Without doubt, the templates are really overkill for captives and we can only complete some of the information. We want to save time and money for both captive owners and supervisors and we will try to get agreement for our suggested approach from the European Insurance and Occupational Pensions Authority (EIOPA).
What are your members telling you about the captive insurance market at the moment?
The owners of captives usually do not have a comprehensive view of the captive insurance market, so most of our colleagues follow the reports of captive managers. ECIROA cooperates with the leading captive managers and we keep each other advised of developments in the different jurisdictions.
How will ECIROA find simplifications for the nature of captives under Pillar I, II and III of the Solvency II directive?
Via PoP, we try to cut down excessive requirements that we cannot fulfill The request of EIOPA is ‘comply or explain’—this implies that we cannot document activities or describe the work of (usually requested) committees, when such a captive is managed by a service provider and the underwriting volume of that company is focused on just one, two or three policies (or programmes). As mentioned above, we have produced best practice guidelines to help captive owners with Pillar II and we are aiming to achieve a reduction in the volume of reporting in Pillar III.
Are captives considering re-domiciling to jurisdictions that aren’t seeking Solvency II equivalency?
For the time being, we are not aware of such considerations. Bear in mind that the QIS5 (fifth quantitative impact study) results of our own captive survey, which included the data of around 150 captives in Europe, didn’t show the need for expensive capital injection or huge adjustments. The fear was, and still is, that the additional workload and reporting will cause higher administration costs. I am aware of some corporations establishing new captives in Europe. There are a lot of rumours in the market about re-domiciling that is caused by parties trying to expand their business volume.
What kind of relationship does ECIROA have with regulators? Are they welcoming the association’s views?
We have close contact with various local supervisors, as well as individual captive owners. We are able to compare the request of the European Commission and EIOPA with actual comments from some captive domiciles. Nevertheless, it is our main target to increase the exchange of arguments and the influence to determine the PoP and it is our impression that our activities and contributions are welcome.
How has your role as managing director at Deutsche Bank and industry experience helped you to manage ECIROA?
Due to the fact that my experience is rather comprehensive, based on my functions as senior account manager and underwriter of one of the market leading insurers, followed by some years as an in-house broker and captive manager, I guess that I am able to cover most of the critical questions we dispute within this regulatory environment.
Unfortunately, many market participants have very specific (and much appreciated) expertise on a particular topic, but they lack understanding of the interdependencies within the insurance market with its huge variety of influencing factors. This is one of the reasons to help colleagues wherever possible to clarify and to sort out potential problems.
