The adoption of the European Commission’s final acts amending the Solvency II delegated regulation show a “lack of progress” on a number of key issues, according to Insurance Europe.
Olav Jones, deputy director general of Insurance Europe, explained that the proposals introduce some basic improvements but fail to address major industry concerns.
“Insurance Europe is disappointed because, while some much-needed improvements and simplifications have been achieved, these are outweighed by the lack of progress on key issues impacting the industry’s ability to maintain and develop their long-term products and investments,” Jones said.
Ongoing concerns include a lack of action on the issue of risk margins, which Insurance Europe argues adds €200 billion to the amount of capital the industry needs to hold and could be safely reduced.
The EC also failed to sufficiently address volatility adjustment, which was designed to reduce artificial volatility for long-term business, but does not work as intended, Insurance Europe claimed.
Additionally, the industry has concerns about the unnecessary restrictions on the loss absorbing capacity of deferred taxes.
Concerning the calibration of long-term investments in equity, Insurance Europe welcomed the Commission’s recognition that equity capital charges are currently too high where insurers can take a long-term approach to investment.
“Overall, this is a missed opportunity,” Jones continued. “The next review, to be completed by the end of 2020, needs to be much more ambitious in terms of identifying and prioritizing areas where — long-overdue — improvements to Solvency II can be made.
“It will have a direct impact on what the insurance industry can provide for customers, as well as its ability to support the Commission’s long-term goals of growth and investment for Europe.”
