The European Insurance and Occupational Pensions Authority (EIOPA) published today its ຄໍາແນະນໍາດ້ານວິຊາການ to the European Commission, recommending that a one-to-one capital requirement be applied consistently to all crypto holdings of EU (re)insurers. EIOPA considers a 100% haircut in the standard formula prudent and appropriate for these assets in view of their inherent risks and high volatility.
Crypto assets are a relatively new assets class in finance and their regulatory treatment is still evolving. While the Capital Requirements Regulation (CRR) and the Markets in Crypto-Assets Regulation (MiCAR) include transitional prudential measures for crypto assets, the EU’s regulatory framework for (re)insurers so far has lacked specific provisions on crypto assets. As a result, (re)insurers currently classify their crypto assets without a consistent approach. This raises concerns about the risk sensitivity of these practices and the level of prudence associated with them.
EIOPA’s empirical analysis of historical crypto asset data suggests that current capital weight options – such as the 80% stress level applied to intangible assets – in fact underestimate the risks associated with crypto exposures.
Policy proposal
To promote a harmonized, prudent and proportionate treatment of crypto assets, EIOPA is proposing the introduction of a blanket 100% capital requirement across all crypto holdings, regardless of their balance sheet treatment or whether the exposure is direct or indirect.
The uniform treatment EIOPA proposes would adequately reflect the high risks associated with crypto investments without creating unnecessary complexity or imposing additional reporting requirements on (re)insurers at a time when their investments in crypto assets are still modest in size.
A possible broader adoption of crypto assets may, however, require a more differentiated approach down the line. The treatment of crypto holdings under Solvency II should therefore be reviewed in the future in light of market developments and regulatory approaches in other sectors.
ຄວາມເປັນມາແລະຂັ້ນຕອນຕໍ່ໄປ
This publication comes in response to the European Commission’s Call for Advice ແລະປະຕິບັດຕາມ a ການປຶກສາຫາລືສາທາລະນະ on the topic with stakeholders. The Commission will now consider EIOPA’s technical advice in the review of level 2 provisions of Solvency II.
