Insurance Europe has responded to the European Commission’s Better Regulation consultation, saying that while the proposals contain helpful and necessary changes, there are elements that could undermine improvements and increase costs.
The response from Insurance Europe, says that while Solvency II has provided a ‘more level regulatory playing field across Europe’, a ‘number of improvements’ are still needed.
This is because, Insurance Europe says, Solvency II does not reflect the long-term business models of insurers. According to the group, this results in excessive capital burdens and solvency volatility. In some cases, Insurance Europe says, it has created an operational burden for insurers.
Insurance Europe went on: “These deficiencies result in negative impacts for consumers, both directly through increased costs and less optimal investments and indirectly due to reduced product availability and guarantees. They also constrain the insurance sector’s ability to contribute to the EU’s political priorities, including economic recovery from COVID-19, the Capital Markets Union (CMU) and the European Green Deal, as they reduce the sector’s capacity to take risk.”
The authors added: “Finally, they undermine insurers’ international competitiveness, their natural ability to take a long-term approach to products and investment and their ability to avoid procyclical behaviour during a crisis.”
In a statement, Insurance Europe said Solvency II should:
- Correct the excessive capital requirements and artificial volatility for long-term business by aligning the measurements with the real risks faced by insurers, while keeping customers very well protected.
- Improve proportionality and avoid increasing costs and operational burden.
- Maintain the existing, well-designed supervisory ladder of intervention.
