The European Insurance and Occupational Pensions Authority (EIOPA) has published revised Guidelines on the supervisory review process (SRP) and on the treatment of market and counterparty risk exposures under the Solvency II standard formula, aligning the framework with the recently concluded Solvency II review.

According to EIOPA, the primary objective of the revision is to clarify and streamline existing provisions while incorporating emerging risks into the supervisory scope. In line with its commitment to regulatory simplification, the Authority has limited amendments to those strictly necessary to support the implementation of the updated Solvency II framework and to foster supervisory convergence across the European Union.

Strengthening the Supervisory Review Process

The updated Guidelines on the supervisory review process pursues two core objectives: aligning existing provisions with recent regulatory developments and supervisory best practices, and integrating new tools to address risks and market trends that have emerged since the original Guidelines were adopted in 2015.

Reflecting the outcome of the Solvency II review, the revised framework introduces new sections covering business model analysis, joint on-site inspections, early intervention measures, pre-emptive recovery planning, and conduct supervision.

In response to the growing significance of emerging risks, EIOPA also provides additional guidance requiring national supervisors to incorporate sustainability risks, IT and cyber risks, as well as Supervisory Technology (SupTech), into their review processes.

While primarily addressed to national supervisory authorities, the updated Guidelines are expected to indirectly benefit insurers and reinsurers by enhancing consistency, predictability and transparency in supervisory engagement across the EU.

Adjustments to Market and Counterparty Risk Treatment

EIOPA has also revised its Guidelines on the treatment of market and counterparty risk exposures in the standard formula. The changes focus on updating legal references and simplifying the text.

Four existing Guidelines have been deleted, several have been broadened in scope, and a new Guideline has been introduced to clarify the treatment of leveraged funds.

Overall, the revisions aim to ensure that the Solvency II framework remains fit for purpose, risk-sensitive and aligned with evolving market realities, while avoiding unnecessary regulatory burden.