How many insurers were subject to winding-up proceedings since the introduction of Solvency II on 1/1/2016? In part I, we revealed that based on the OJ publications about 20-30 insurers have been subject to winding-up proceedings. But is 23 (or 34) the true story? Would the findings of the second source, the data of the national supervisory authorities, corroborate these revelations?
In line with Article 31 2(c) of the SII FD, and ITS 2015/2451, supervisory authorities must make public any reorganisation measures or winding-up proceedings taking place in their home Member State. Included in the national aggregate statistics is the overall category “The number of insurance and reinsurance undertakings subject to reorganisation measures or winding-up proceedings”. Reinsurance data are included, unlike in the OJ publications, although in practice no reinsurance undertaking according to these statistics, were subject to reorganisation measures and/or winding-up proceedings.
Summarising the aggregate statistical data disclosed by the supervisory authorities of each of the 27 Member State, we calculated the following for the Union:
- In 2016, 68 insurance or reinsurance undertakings went through reorganisation or winding-up proceedings;
- In 2017, 74 insurance or reinsurance undertakings went through reorganisation or winding-up proceedings;
- In 2018, 75 insurance or reinsurance undertakings went through reorganisation or winding-up proceedings;
- In 2019, 41 insurance or reinsurance undertakings went through reorganisation or winding up-proceedings.
Thus, based on the disclosed statistical data of the EU27 national supervisory authorities, there were a cumulative total of 258 insurance undertakings. A differentiation in the statistical data between reorganisation versus winding-up proceedings is not specified as this is not required by ITS 2015/2451. Consequently, the aggregate statistics do not inform the reader about the exact number of winding-up cases. Moreover, the disclosed aggregate statistics provide no way of knowing if an undertaking is going through either a reorganisation or through a winding-up proceedings or both, as undertakings are not categorised separately by reorganisation measures or winding up proceedings, but are categorised by “Life insurance undertakings”, “Non–life insurance undertakings”, “Insurance undertakings which simultaneously pursue both life and non-life insurance activities”, or “Reinsurance undertakings”. Hence, the aggregated statistical data cannot provide the total unique number of (re)insurance undertakings (only) subject to winding-up proceedings. Because no further information is given in the aggregate statistical data, we believe it is probably not correct to presume that there were a total of 258 cases of insurance undertakings in the EU27 subject to reorganisation measures or winding-up proceedings between 2016-2019. Or is it? Theoretically, all these cases can be unique cases, and all these cases can be winding-up cases.
Elementary, my dear Watson – Some methodological questions
Because of the large discrepancy between the information published in the OJ versus the information disclosed in the Aggregate Statistical data, several issues spring to light. A few are:
- It is unclear whether supervisory authorities from each Member State measure the occurrence of reorganisation measures or winding-up proceedings in the same way.
- In the aggregate statistics, the name of the undertaking concerned is not required, making it difficult to determine if an undertaking going through reorganisation for two years is counted in the template by the supervisory authorities for both years, or just for the initial one. For example, an undertaking which started reorganisation measures in 2016, is it still counted as in reorganisation in the following years in the aggregate statistics template, and this as long as the reorganisation is ongoing?
- Regarding the occurrences of reorganisation measures and winding-up proceedings, there have only been two cases of undertakings that have gone through both. How do the aggregate statistics count these?
Connecting the dots?
Can the two sources be combined? We found there are many reasons why the two sources cannot be combined to arrive at one unique figure. For example, the publication in the OJ specifies the type of measure, the name of the undertaking, the home Member State, and the date of publication, allowing for counting unique cases. In the aggregate statistics, the cases are organised per year and per type of insurance undertaking, i.e. whether an undertaking is a life insurer, a non-life insurer, a composite life and non-life insurer, or a reinsurance undertaking, but no names are given and the reorganisation and winding-up measures are lumped together. The discrepancies regarding the type of undertaking, type of measure, scope and duration of the measures and proceedings make it quite impossible to match up the data found in the OJ with the results of the data disclosed in the aggregate statistics, independent of the issues surrounding the counting methodology.
Disregarding the discrepancies in methodological approach as outlined above, just comparing the number of cases disclosed by each national supervisory authorities in the aggregate statistics with the amount of cases published by the national competent authorities in the OJ for the years 2016, 2017, 2018 and 2019, we also found they do not agree. By way of example, in 2018, Bulgaria, Italy, and Slovakia were the only Member States to have a consistent number of cases disclosed by their supervisory authorities compared to those published in the OJ. Hungary and Spain’s supervisory authorities disclosed in the aggregate statistics a higher number of cases than were published in the OJ, inversely, Denmark’s supervisory authorities disclosed no cases, yet one was published in the OJ. Our findings conclude that there is no cohesion between the aggregate statistical data from national supervising authorities and the cases published in the OJ by competent authorities as both appear to be lacking data.
We did an ultimate attempt by researching the EIOPA register for (re) insurance undertakings which ceased their activities between 1 January 2016 and 15 June 2021. The search resulted in 569 cases and includes also cessations not due to winding-up but e.g. to M&A. The register does not indicate the reason for the cessation and can therefore not be used as alternative source.
The difference between 27 and 258 cases is large, but timid conclusions are possible
Although we started out with the intention to understand the number of reorganisation measures and winding up proceedings in the EU of the insurance and reinsurance sector, but especially the winding up proceedings, we regret to conclude that no trustworthy and robust number of winding-up cases can be derived from the current disclosed public information based on SII. In addition, the difference between 27 cases and 258 cases for the period 2016-2019 is too large. This is regrettable. There is an urgency to improve the methodology that is currently employed to measure the winding-up and reorganisation measures in EU Member States.
But based on the comparison between the notices that were published in the OJ, and the totals of the aggregate statistics that were published by the national supervisory authorities, we decided nevertheless to calculate a range of the percentage of insurance undertaking subject to winding up proceedings or reorganisation measures that have occurred since 2016. Ideally, we would understand what these numbers represent in premiums or technical provisions, but that is probably a few bridges too far as we still have no universe defined. By way of example for non-life insurance undertakings (not including composite insurance undertakings) and based on the two sources, we arrived at the following calculations for the percentages of undertakings that were subject to reorganisation measures or winding up:
- 2016: 0.51%- 2.93%
- 2017: 0.75%- 3.37%
- 2018: 0.53%- 3.34%
- 2019: 0.23%- 2.02%.
Is the SII review an opportunity to create the promised transparency? For a more complete study, contact Lieve Lowet.
(With a special thank you to Watsons Samantha Feder and Anas Djibet)
The author, Lieve Lowet is an EU Affairs consultant and lobbyist since 2003, focuses on European dossiers relevant for the insurance and pension sector. From 2003 to 2008, she was Secretary-General for the international mutual insurance association AISAM (now AMICE), which accounted for 15% of the European and 6% of the world insurance market. Prior, she worked for McKinsey as a European banking and insurance expert.
