The UK may have afforded itself the dubious luxury of a General Election in its desperation to find a way of breaking the Brexit impasse but in the rest of the European Union, especially among its regulators, it is business as usual.
For the European Insurance and Occupational Pensions Authority (EIOPA) this means holding its 9th Annual Conference in Frankfurt next Tuesday (19 November).
It features the usual line-up of the most powerful figures in the European insurance industry, led by an opening panel of chief executives – Oliver Bäte, Chief Executive Officer of Allianz; Andreas Brandstetter, President, Insurance Europe and CEO, UNIQA Insurance Group; Thomas Buberl, Chief Executive Officer, AXA; and Christian Mumenthaler, Chief Executive Officer, Swiss Re.
Once the CEOs have laid down a few strategic markers, the conference will get down to tackling what EIOPA sees as the key issues on its agenda and the dreaded Brexit word does not feature anywhere on their agenda.
Predictably, climate change and the seemingly never-ending Solvency II review will dominate the day’s proceedings.
The keynote address on climate change will be given by Frank Elderson, an member of the supervisory board of the European Central Bank and chairman of the Network for Greening the Financial System. The choice of a banker to lead this discussion is interesting in itself because it shows how regulators are now joining up the dots when it comes to the systemic threats to financial stability posed by climate change.
The session will turn to a panel of climate experts and insurers to focus on the detailed questions it has set itself in advance of the event.
• Climate change: Are the insurance and pensions sector leading the way?
• Insurability – Sustainability – Affordability: Are they indeed achievable?
• What role does innovation and digitalisation play?
• How to prepare and raise awareness of the younger generation?
• Does pensions sustainability go hand in hand with climate friendly investment?
• Can the Pan-European Personal Pension Product work for the climate sustainable purpose?
• How to close the protection gaps?
This session follows hard on the heels of EIOPA publishing an Opinion on Sustainability and Solvency II. This echoed many of the comments already made by the Bank of England and the Prudential Regulation Authority by calling on insurers to implement measures to identify and mitigate climate change-related risks, especially in view of a substantial impact on their business strategy. In particular, EIOPA stressed the importance of scenario analysis.
To increase the European market and citizens’ resilience to climate change, EIOPA says (re)insurers should consider the impact of their underwriting practices on the environment, something climate campaigners such as Unfriend Coal have been consistent in advocating.
In launching the new Opinion, Gabriel Bernardino, Chairman of EIOPA, made it clear that climate-sensitive policies for underwriting and investment now go hand-in-hand: “EIOPA’s overall goal is securing a resilient industry in a sustainable environment for the benefit of consumers. The stewardship role of (re)insurers in contributing to climate change adaptation and mitigation is more important than ever. This Opinion outlines how (re)insurers can contribute to identifying, measuring and managing risks arising from climate change, through their investment and underwriting activities”.
Insurers will probably be encouraged by the title of the session on Solvency II – “Evident-Transparent-Simpler” – although will be forgiven a touch of scepticism about whether next year’s review will achieve those objectives. It will be one of the first big post-Brexit (if it happens) tests for financial regulation, something that the panellists, which include Tony O’Riordan, the chief financial officer of New Ireland Insurance, are likely to remind delegates.
The issue will be simple: if the Solvency II review propose significant revision to the current regime, will the PRA follow the changes? It makes the right noises about maintaining alignment in order to ease the complications of cross-border trading but the review could come out in the middle of a tense battle over wider future trading relationships if Brexit happens with the deal that is currently on the table. This has a transition period until the end of next year in which the UK and EU are meant to settle the Future Trading Relationship. This timetable seems fanciful to most experts which means we could be in for a bumpy ride with the EU. Insurers will be hoping the Solvency II review does not become one of those bumps that derails the hoped-for smooth transition.
• Look out for our report from the EIOPA conference next week.