Amendment to the definition of insurance portfolio for the purpose of transfer transactions
On 3 December 2020, IVASS published the consultation document n. 5/2020 (“IVASS Consultation Document n. 5”) regarding the amendment to its Regulation no. 14/2008 (“IVASS Regulation”) ruling – among others - the procedure for the authorization of portfolio transfers as set out by Legislative Decree n. 209 of 7 September 2005 (“The Italian Insurance Code”).
The amendment is aimed at including in the definition of “insurance portfolio” also those composed exclusively by claims. Indeed, according to the current definition “insurance portfolio” means “all the insurance contracts, including credits and debts linked to those contracts, having a common distinctive element such as the classification under the same or more than one insurance class, the distribution channel adopted for distributing the contracts, the type of policyholder, the territorial area and any common element which allows to identify all the rights and obligations ceded” while IVASS Regulation expressly excludes that a portfolio may be composed by claims only.
IVASS Consultation Document n. 5 is aimed at repealing the exclusion of portfolios composed by insurance claims only for the purpose of the above definition, so that to change the scope of application of insurance portfolio transfer transactions. As a consequence of the implementation of such amendment, insurance undertakings would also be allowed to transfer to another authorized insurance or reinsurance carrier portfolios exclusively consisting in a number of insurance claims.
The goal of the new IVASS rules and the implications for the insurance market
As clarified by IVASS, the amendment to IVASS Regulation is the first step of a complex review by IVASS of its regulation on extraordinary transactions, in order to align it to Solvency II legal and regulatory framework and to follow the approach adopted by the other EU member States.
The proposed amendment to IVASS Regulation is in line with the risk based approach provided by Solvency II and takes into account that the management of run-off portfolios requires the administration of a number of insurance relationships in compliance with the relevant policies’ contractual provisions and the assumption of risks arising from the performance of the said contracts, that is necessary reflected in the prudential provisions of the insurance undertakings.
The new rules are aimed at satisfying the needs of the insurance market and will allow insurance undertakings to organise their business in a more flexible and efficient way – also in case of transfer of run-off portfolios - without prejudice to the rights and interests of policyholders and insureds, the prudential requirements of the insurance undertakings involved and thus the stability of the insurance market as a whole.
IVASS consultation will run until 18 December 2020. Any feedback and proposals may be sent to IVASS by said date.
Authored by Silvia Lolli and Giulia Monacelli