1.As part of the regular supervisory review process, supervisory authorities shall monitor the liquidity position of insurance and reinsurance undertakings. Where they identify material liquidity risks, they shall inform the insurance or reinsurance undertaking concerned thereof. The insurance or reinsurance undertaking shall explain how it intends to address those liquidity risks.
2.Member States shall ensure that supervisory authorities have the necessary powers to require undertakings to reinforce their liquidity position when material liquidity risks or deficiencies are identified. Such powers shall be applied where there is sufficient evidence regarding the existence of material liquidity risks and the absence of effective remedies taken by the insurance or reinsurance undertaking.
The measures taken by a supervisory authority on the basis of this paragraph shall be reviewed by it at least every six months and be removed when the undertaking has taken effective remedies.
Where relevant, the supervisory authority shall share the evidence of vulnerabilities in terms of liquidity risks with EIOPA.
3.Member States shall ensure that, in relation to individual undertakings facing material liquidity risks that may cause an imminent threat to the protection of policy holders or to the stability of the financial system, supervisory authorities have the power to temporarily:
restrict or suspend dividend distributions to shareholders and other subordinated creditors;
restrict or suspend other payments to shareholders and other subordinated creditors;
restrict or suspend share buy-backs and repayment or redemption of own fund items;
restrict or suspend bonuses or other variable remuneration;
suspend redemption rights of life insurance policy holders (‘redemption rights’).
The power to suspend redemption rights shall only be exercised in exceptional circumstances which affect the undertaking, as a last resort measure and where that is in the collective interest of policy holders and beneficiaries of the undertaking. Before exercising that power, the supervisory authority shall take into account potential unintended effects on financial markets and on the rights of policy holders and beneficiaries of the undertaking, including in a cross-border context. Supervisory authorities shall make public their reasons for the application of that power.
The application of any measure referred to in the first subparagraph shall last no more than three months. Member States shall ensure that a measure can be renewed if the reasons that justify it are still present and that it is no longer applied when those reasons are no longer present.
Without prejudice to Article 144c(6), Member States shall ensure that, until the suspension of redemption rights is lifted by the supervisory authorities, insurance and reinsurance undertakings concerned do not:
make any distributions or other payments to shareholders or other subordinated creditors;
proceed with share buy-backs or repay or redeem any own fund items; or
pay bonuses or other variable remuneration to members of the administrative, management or supervisory body, key function holders or senior management.
Member States shall ensure that supervisory authorities have the necessary powers to enforce the requirements referred to in the fourth subparagraph.
Member States shall ensure that bodies and authorities with a macroprudential mandate, where different from the supervisory authorities, are duly informed in a timely manner of the supervisory authority’s intention to make use of the powers referred to in this paragraph, and are involved in assessing the potential unintended effects referred to in the second subparagraph.
Member States shall ensure that supervisory authorities notify EIOPA and ESRB whenever the powers referred to in this paragraph are exercised to address a risk for the stability of the financial system.
4.When exercising the power referred to in paragraph 3 of this Article, supervisory authorities shall duly take into account the proportionality criteria referred to in Article 29(3).
Where, after consulting the ESRB, EIOPA considers that the exercise of the powers referred to in paragraph 3 by the competent authority is excessive, it shall issue an opinion to the supervisory authority concerned to the effect that the decision of that supervisory authority should be reviewed. That opinion shall not be made public.
5.When exercising the power referred to in paragraph 3 of this Article, supervisory authorities shall take into account the evidence resulting from the supervisory review process and a forward-looking assessment of the solvency and financial position of the undertakings concerned, in line with the assessment referred to in Article 45(1), second subparagraph, points (a) and (b).
6.The powers referred to in paragraph 3 may be exercised in relation to undertakings concerned operating in a given Member State where the exceptional circumstances referred to in paragraph 3 affect the whole or a significant part of the insurance market.
Member States shall appoint an authority to exercise the powers referred to in the first subparagraph.
Where the appointed authority is different from the supervisory authority, the Member State shall ensure proper coordination and exchange of information between the different authorities. In particular, all authorities shall be required to cooperate closely and to share all the information that may be necessary for the adequate performance of the duties entrusted to the authority appointed pursuant to this paragraph.
7.Member States shall ensure that the authority referred to in paragraph 6, second subparagraph, notifies in due time EIOPA, and, where the measure is taken to address a risk to the stability of the financial system, the ESRB, of the use of the powers referred to in paragraph 6.
The notification shall include a description of the measure applied, its duration, and the reasons for the use of the power, including the reasons why the measure was considered to be effective and proportionate in relation to its negative effects on policy holders.
8.In order to ensure consistent application of this Article, EIOPA shall, after consulting the ESRB, develop guidelines further specifying:
the measures to address deficiencies in liquidity risk management and the form, activation and calibration of powers that supervisory authorities may exercise to reinforce the liquidity position of undertakings where liquidity risks are identified and not adequately remedied by those undertakings;
the existence of exceptional circumstances that justify the temporary suspension of redemption rights;
the conditions for ensuring the consistent application of the temporary suspension of redemption rights as a last resort measure across the Union and the aspects to consider for equally and adequately protecting policy holders in all home and host jurisdictions.