The European Insurance and Occupational Pensions Authority (EIOPA) has published a supervisory statement directing national supervisors to apply consistent, risk-based scrutiny when authorizing and overseeing private equity-backed insurers and reinsurers. Following its earlier consultation, the statement focuses on additional risks that may arise from private equity ownership structures and business models, while keeping these undertakings subject to the same risk-based standards as other insurers. Supervisors should guard against capital extraction driven by private equity firms’ shorter investment horizons and examine acquisition financing, debt levels and the full ownership chain, including entities in countries with non-equivalent regulatory regimes. They should also assess whether increased investment in private credit and other complex, illiquid assets, affiliate exposures, leverage and cost reductions remain consistent with the prudent person principle and sound management. Reinsurance arrangements require scrutiny of effective risk transfer and counterparty, liquidity and recapture risks, while governance reviews should ensure independent management and decisions in the interests of policyholders and beneficiaries.
European Insurance and Occupational Pensions Authority sets supervisory expectations for private equity-backed insurers
The European Insurance and Occupational Pensions Authority has set supervisory expectations for the authorization and ongoing oversight of private equity-backed insurers and reinsurers. National supervisors should scrutinize capital extraction, complex and debt-funded ownership structures, alternative asset exposure, reinsurance risk and governance conflicts. The statement follows EIOPA’s earlier consultation and seeks consistent risk-based supervision across the European Union.