The Danish FSA's supervisory review process

The Danish FSA aims to intervene at as early a stage as possible, which is why the supervision in the field of insurance is forward-looking. The insurance undertakings are assessed not only in the context of current risks, but also in the context of risks that could arise in the future.

Article 36 of the Solvency II Directive (Directive 2009/138/EC) establishes the supervisory review process for European supervisory authorities. The supervisory authorities must review and evaluate the strategies, processes and reporting procedures that insurance undertakings establish in order to comply with the regulations. The supervisory authorities must also assess the qualitative requirements relating to the system of governance and the risks that insurance undertakings face or may face, as well as the ability of those undertakings to assess these risks.

 

Specifically, the supervisory authorities must in particular review the insurance undertakings’ compliance with the legislation regarding the following:

  • the system of governance, including the Own Risk and Solvency Assessment,

  • technical provisions,

  • capital requirements,

  • investments,

  • the quality and quantity of own funds, and

  • internal models, if these are used to calculate the Solvency Capital Requirement.

 

Pursuant to Article 31 of the Solvency II Directive, the Danish FSA is obliged to disclose the criteria and methods used in the above supervisory review process, including the quantitative tools developed in accordance with Article 34(4) of the Directive to assess the ability of the insurance undertakings to cope with possible events or future changes in economic conditions that could have adverse effects on their overall financial standing.

 

You can read more about the Danish FSA's supervisory review process here.