European insurers are keeping up the pressure on European Commission (EC) to use the review of Solvency II to ensure they can continue to offer long-term life and pension products with guarantees and also contribute towards financing of the economy, a key expectation emerging from governments as they set out their national Covid-19 recovery plans.
Insurance Europe, the insurers’ trade body, has used its response to the EC’s impact assessment of the Solvency II review being carried out by the European Insurance and Occupational Pensions Authority (EIOPA) to re-state its concerns that insurers’ liabilities are not exaggerated, especially long-term liabilities, in the quest to mitigate artificial volatility is key.
It also demanded that policy options which result in a “justified and needed reduction in overall capital requirements” should be considered by the Commission.
Although governments are focussing on “green” investments as a core element of economic stimulus packages, insurers are fearful that this could be linked to the Solvency II review.
“Europe’s insurers do not support non risk-based reductions in capital requirements as incentives to address climate change. Addressing the measurement flaws and other barriers in Solvency II will create strong enough incentives when combined with insurers’ own natural interest and business model, together with the Commission’s powerful regulatory initiatives (eg the Sustainable Finance Disclosure Regulation, Taxonomy and the Non-Financial Reporting Directive) and the wider EU Green Deal”, IE says in its response.
Insurance Europe also says it opposes plans to harmonise insurance guarantee schemes as “Solvency II, when implemented appropriately, already offers very high and sufficient levels of protection”.
It says the international competitiveness of the European insurance industry must be taken into account more by regulators.
“Other jurisdictions appear to take account of the special characteristics of insurers’ long-term business model, as well as their economic and social goals, to a greater extent in the design and calibration of their regulatory frameworks. This is something that should be reflected in the review of the framework”.