The insurance sector has reportedly called on the EU to use the “golden opportunity” offered by the review of Solvency II to unlock additional capital.
Insurance Europe, in a recent statement, said that by increasing insurers’ investment capacity, the industry could further contribute to the political guidelines laid out by the recently re-elected President of European Commission, namely increasing competitiveness, as well as accelerating the green and digital transitions, and creating a more efficient capital market.
Readers will be aware that Insurance Europe wrote a letter to the European Commission (EC) in May, urging for them to deliver on Solvency II deal.
From what we understand, the EU is in discussions on the technical details needed to implement the review of Solvency II.
In their statement, which has been accompanied by several position papers, Insurance Europe said that “the details must closely reflect the political agreement made last year.”
This also includes a proposal to help reduce the risk margin, the buffer European insurance companies are expected to hold in the rare case of insolvency, which currently reduces insurers’ available capital by €141 billion.
As well as this, Insurance Europe has called for further improvements, which to our understanding, would approximately halve the size and volatility of the risk margin, ultimately increasing the industry’s risk bearing capacity by up to €70 billion.
However, Insurance Europe noted, that in line with the EU’s commitment, this should be complemented by a reduction on reporting and operational burden for the industry.
Angus Scorgie, Head of prudential regulation & international affairs and reinsurance at Insurance Europe, commented: ‘The buffer European insurance companies are expected to hold in the rare case of insolvency is excessive and unnecessary. When you consider that the current risk margin in Europe is up to three times greater than in the UK, twice as large as it is in Japan and, in the US there is no risk margin at all, current European calibrations are holding back capital that Europe’s economy desperately needs.”
Adding: “The Solvency II review is a golden opportunity for the newly re-elected President of the European Commission, Ursula von der Leyen, to deliver on her promises to unlock capital and increase competitiveness in the EU.’’
