Insurance Europe has today published a position paper outlining its views on the advice provided by the European Insurance and Occupational Pensions Authority (EIOPA) to the European Commission on the review of the Solvency II regulatory framework.
EIOPA’s advice to the Commission represents a missed opportunity to appropriately address the existing flaws in the framework in a way that also supports the EU’s overarching objectives set out in the Green Deal and the Capital Markets Union.
The shape the review takes will be decided upon by the three EU co-legislators – the Commission, the Council of the EU and the European Parliament. If they decide to implement EIOPA’s proposals, it could decrease the risk-taking capacity of EU insurers by around €60bn and would significantly reduce insurers’ ability to invest in the real economy. A €60bn capital impact would, for example, reduce the investment capacity of insurers by the equivalent of around €170bn in equity investments, or around €680bn of corporate bond investments.
If implemented, EIOPA’s advice would further amplify Solvency II’s conservativeness and measurement flaws, preventing the insurance industry from fully supporting the EU’s ambitious recovery, investment and sustainability goals.
None of these consequences are justified, as there is no evidence that the industry needs more capital, nor that the framework needs more layers of prudency, on top of the long list of those that already exist.
Instead, the EU insurance industry is calling for the review of Solvency II to: