General Insurance Article - EIOPAs advice would further amplify Solvency IIs flaws


Insurance Europe has published a position paper outlining its views on the advice provided by the European Insurance and Occupational Pensions Authority (EIOPA) to the European Commission on the review of the Solvency II regulatory framework.

 EIOPA’s advice to the Commission represents a missed opportunity to appropriately address the existing flaws in the framework in a way that also supports the EU’s overarching objectives set out in the Green Deal and the Capital Markets Union.

 The shape the review takes will be decided upon by the three EU co-legislators – the Commission, the Council of the EU and the European Parliament. If they decide to implement EIOPA’s proposals, it could decrease the risk-taking capacity of EU insurers by around €60bn and would significantly reduce insurers’ ability to invest in the real economy. A €60bn capital impact would, for example, reduce the investment capacity of insurers by the equivalent of around €170bn in equity investments, or around €680bn of corporate bond investments.

 If implemented, EIOPA’s advice would further amplify Solvency II’s conservativeness and measurement flaws, preventing the insurance industry from fully supporting the EU’s ambitious recovery, investment and sustainability goals.

 None of these consequences are justified, as there is no evidence that the industry needs more capital, nor that the framework needs more layers of prudency, on top of the long list of those that already exist.

 Instead, the EU insurance industry is calling for the review of Solvency II to:
 • Address flaws for long-term business – Insurers’ capacity to invest over the long-term is based on their business model, including their ability to offer long-term products. Addressing related flaws would allow insurers to continue offering long-term savings and guarantee products that consumers value and need. It would also enable insurers to enhance their investments in the real economy, including those in equities and assets that support the sustainable transition. Overall, the impact of all the changes should lead to a justified and needed reduction in capital requirements and volatility.
 • Address operational complexity and burden – This can be achieved by making sure proportionality works in practice and by simplifying and streamlining reporting requirements. This would lead to a more diversified and efficient insurance market, which is directly beneficial for European consumers.
 • Avoid gold-plating international agreements on systemic risk measures – The implementation of the International Association of Insurance Supervisors’ holistic framework for addressing systemic risk should be done with proportionality in mind and should not be gold-plated to avoid harming the global competitiveness of EU insurers operating in foreign markets.
 • Focus on areas of proven need and avoid changing what works – The Solvency II review should focus any changes in areas where there is a proven issue and should avoid changes where there is no real need, and especially avoid changes to areas that have proven their value.
  

Back to Index


Similar News to this Story

Health and wellbeing benefits boosts SME productivity
Research from the Association of British Insurers (ABI) shows that offering health and wellbeing benefits to staff can play a valuable role in boostin
Pay by mile pricing to be standard within four years
Research from By Bits has found that the motor insurance industry is heading towards usage-based pricing models, with 91% of insurers regarding it as
Car insurance prices hit seven year low as mileages plummet
Car insurance prices have fallen sharply to reach their lowest point since 2014, according to new research by MoneySuperMarket, with experts putting t

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.