The European Insurance and Occupational Pensions Authority (EIOPA) published a Supervisory Statement giving initial guidance to supervisors on how to treat insurers’ foreseeable dividends in own funds, aiming to improve supervisory convergence across differing market practices. Under Solvency II, European (re)insurers and groups must deduct foreseeable dividends, distributions and charges from own funds because they no longer meet permanence and availability criteria and lack loss-absorbing capacity. EIOPA notes that while Commission Implementing Regulation (EU) 2023/894 instructs firms to deduct annual foreseeable dividends in full, several approaches have emerged, including annual full deduction, quarterly accrued deduction, and deduction after approval by the administrative, management or supervisory body (AMSB). Dividends become foreseeable at the latest when declared or approved by the AMSB or any other person effectively running the undertaking. EIOPA expects supervisors not to prioritise supervisory actions where a firm uses the quarterly accrued approach. It also indicates that annual full deduction remains feasible in stable and predictable environments or where there is a history of fixed dividends, while deduction only after AMSB approval is feasible only where objective difficulties prevent estimating foreseeable dividends.
European Insurance and Occupational Pensions Authority 2025-02-20
European Insurance and Occupational Pensions Authority issues supervisory guidance on deducting foreseeable dividends from insurers’ own funds
The European Insurance and Occupational Pensions Authority (EIOPA) issued guidance on treating insurers' foreseeable dividends in own funds under Solvency II. While the Commission Implementing Regulation (EU) 2023/894 mandates full annual deduction, various approaches have emerged. EIOPA advises against prioritizing actions for firms using quarterly accrued deduction and outlines conditions for other methods.