Insurance Europe, the European insurance and reinsurance federation, has levelled a number of criticisms against the 2020 review of Solvency II recently drafted by the European Insurance and Occupational Pensions Authority (EIOPA).
Analysts argue that the draft advice provided by EIOPA includes a very large number of ideas and proposals, some of which may work against the policy objectives of the European Commission.
For example, suggestions to increase capital requirements for long-term business could make it even more expensive and difficult for the re/insurance industry to make long-term investments, Insurance Europe said.
This would adversely impact guaranteed pensions and savings products for customers and constrain insurers’ ability to help finance sustainable transformation and growth, making it more difficult for Europe to remain competitive in a global market place.
Instead, Insurance Europe has called for more focused improvement to Solvency II that would reduce unnecessary burdens and barriers.
“This would enable insurers to maintain and grow their role in protecting customers, and in contributing to stability and growth in Europe’s economy,” it stated.
The federation acknowledged that there are some key issues that need to be addressed in a review of Europe’s regulatory framework, such as the need to fully measure the benefits created by insurers’ long-term business model.
This can lead to an over-estimation of liabilities, investment risk and volatility that can in turn result in excessive overall capital requirements.
“Solvency II is the most sophisticated prudential regime for insurance in the world, but it is also the most conservative,” Insurance Europe said.
“The European industry supports a strong, risk-based regime with very high levels of consumer protection, but the excessively high requirements of the Solvency II framework damage the ability of the industry to maintain and grow its international presence.
“Internationally, European (re)insurers compete with companies that follow regimes that differ greatly from Solvency II. Solvency II’s unnecessarily high capital charges thus damage their global competitiveness.”
