EIOPA Finalizes RTS: New Macroprudential Criteria for ORSA and PPP

1. Introduction: The Final RTS Submitted to the European Commission

On November 17, 2025, the European Insurance and Occupational Pensions Authority (EIOPA) published its final report and submitted draft Regulatory Technical Standards (RTS) to the European Commission. These RTS establish the applicability criteria for supervisory authorities to determine which insurance and reinsurance undertakings must perform macroprudential analyses within their Own Risk and Solvency Assessment (ORSA) and when applying the Prudent Person Principle (PPP). The final submission follows a public consultation period that ran from October 17, 2024, to January 9, 2025.

2. Context: Amendments to the Solvency II Directive

These new requirements originate from amendments to the Solvency II Directive (Directive 2009/138/EC). Specifically, new mandates were introduced in Articles 45(1) and 132(6) of the Directive. These articles empower supervisory authorities to require that undertakings take macroprudential concerns into account in their ORSA and investment strategies (PPP).

3. The Core of the RTS: A Hybrid Approach to Applicability

The RTS specifies a hybrid approach, combining a quantitative threshold with qualitative, risk‑based criteria to identify the undertakings that fall within its scope. This method was chosen to effectively balance the needs of financial stability monitoring with the principle of proportionality, leveraging both quantitative metrics and supervisory judgment.

3.1. The Quantitative Gateway: The €20 Billion Threshold

The primary quantitative criterion automatically places certain undertakings in scope:

• Groups with total assets exceeding EUR 20,000,000,000.
• Insurance or reinsurance undertakings not belonging to such a group, with total assets exceeding EUR 20,000,000,000.

While the RTS focuses on risk‑based qualitative factors, size is retained as a key criterion as it is considered a significant 'risk amplifier' from a financial stability perspective. This threshold was increased from a previously considered figure of EUR 12 billion, taking into account stakeholder feedback from the consultation period and the effects of inflation.

3.2. Supervisory Discretion: The Role of Qualitative Criteria

The qualitative criteria are designed to complement the size‑based threshold. They provide supervisory authorities with the necessary discretion to add undertakings that fall below the €20 billion threshold or to remove undertakings that exceed it if their inclusion would be disproportionate. This flexibility is the core of the hybrid model, allowing authorities to target true systemic risk beyond what a simple size metric can capture.

4. Detailed Breakdown: Specific Criteria for ORSA and PPP

The RTS outlines distinct sets of qualitative criteria for the ORSA and PPP analyses.

4.1. Criteria for ORSA Macroprudential Analysis (Article 1)

These criteria are aligned with the IAIS Holistic Framework and the Insurance Recovery and Resolution Directive (IRRD), ensuring a consistent approach to identifying sources of systemic risk. Supervisory authorities will use the following qualitative criteria when considering whether to request additional macroprudential analysis in the ORSA:

• Interconnectedness: Whether the undertaking is materially interconnected with other financial institutions, which could create contagion channels during a crisis.
• Systemically Relevant Activities:Whether the undertaking has material activities related to:
  • Use of derivative instruments, which can amplify market shocks and create complex, opaque exposures.
  • Exposures with macroprudential implications and potential spillover effects.
  • Offering products with guaranteed benefits or variable annuities, as these can create large, correlated liabilities sensitive to market downturns.
  • Concentration in certain asset classes or common exposures.
• Substitutability: The degree to which the undertaking is substitutable with others, as the failure of a non‑substitutable undertaking could disrupt critical insurance services.
• Liquidity Risk: Whether the undertaking is materially exposed to liquidity risk, as a forced sale of assets could destabilize markets.
• Undertaking‑Specific Risks within a Group: Whether an undertaking's unique risks are insufficiently or inappropriately captured in the group‑level analysis.

4.2. Criteria for PPP Macroprudential Considerations (Article 2)

The decision to require macroprudential analysis as part of the PPP builds directly on the ORSA assessment. It is based on all the criteria listed in Article 1 for the ORSA, with the addition of specific factors related to investment behavior and market movements.

Additional Investment‑Related Criteria

In addition to the ORSA criteria, supervisors will consider the following factors:

• Duration Mismatch: A duration mismatch between assets and liabilities.
• Leverage: Use of leverage stemming from derivatives or securities financing transactions.
• Asset Complexity: Holding assets that are illiquid, difficult to value, or have an opaque and complex structure.
• Undertaking‑Specific Risks within a Group: Whether an undertaking's unique specificities are insufficiently captured in the group's PPP analysis.

5. Rationale and Key Stakeholder Feedback

EIOPA's final report details the rationale for its chosen approach and summarizes the industry feedback that shaped the final rules.

5.1. Why the Hybrid Approach Was Chosen

The impact assessment concluded that the hybrid approach ('Policy Option 3') was superior to both a purely principles‑based and a fully quantitative model. It was deemed most effective at promoting good risk management and discouraging excessive exposure concentration, while offering key benefits:

• Effectiveness: It best promotes good risk management and discourages excessive concentration of exposures.
• Proportionality: It allows for supervisory judgment, ensuring the rules are applied proportionately to the risks posed by an undertaking.
• Efficiency: It balances the need for supervisory convergence across the EU with the flexibility required for national authorities.
• No Additional Reporting Burden: The criteria can be assessed by supervisors using data already provided by undertakings through existing reporting requirements.

5.2. How Industry Feedback Shaped the Rules

The stakeholder consultation provided valuable feedback that influenced the final RTS:

• On the Quantitative Threshold: Stakeholders argued that the initial €12 billion threshold was too low and arbitrary. In response, EIOPA acknowledged these concerns by increasing the threshold to €20 billion, justifying the new figure by accounting for inflation since the original threshold was considered and ensuring sufficient market coverage at both European and national levels. However, it retained a quantitative gateway to ensure a consistent starting point for analysis.
• On Assessing Systemic Risk: Stakeholders noted the difficulty for individual firms to assess their 'inside‑out' risk (their own impact on the financial system), arguing this was the purview of supervisors. They felt an 'outside‑in' assessment (the system's impact on the firm) was more feasible. EIOPA clarified that the mandate covers both perspectives, expecting undertakings to use available information to analyze their potential systemic footprint.
• On Micro vs. Macro Concerns: Some stakeholders commented that microprudential issues like liquidity risk should not be conflated with macroprudential risk. EIOPA responded that an undertaking's microprudential profile is a critical dimension when assessing systemic risk, a view consistent with the IAIS Holistic Framework for systemic risk.

6. Next Steps

The draft RTS has been submitted to the European Commission. The Commission will now review the standards and decide on their formal adoption. Once adopted, the regulation will enter into force on the twentieth day following its publication in the Official Journal of the European Union.