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Too early to harmonise EU insurance guarantee schemes

The effects of the EU’s 2016 Solvency II regulatory regime for insurers on policyholder protection need to be better understood before considering any harmonisation of insurance guarantee schemes (IGS) at EU level.

In its response to a discussion paper from EIOPA on resolution funding and national IGS, Insurance Europe said that rather than considering new rules for IGS, the existing tools and powers provided by Solvency II should be used to their fullest extent and be properly enforced.

While EIOPA acknowledges that “adequate protection of policyholders is at the core of Solvency II”, its discussion paper lacks any assessment of how Solvency II actually affects the risks faced by insurers and how this might, in turn, affect existing national IGS.

Insurance Europe pointed out that EIOPA’s paper refers to insurance failures and near misses that occurred before the Solvency II regime and are therefore no longer relevant.

Should minimum harmonisation in the field of IGS be pursued at EU level, Insurance Europe said national authorities should be allowed significant flexibility to choose features that best suit their market.

To satisfy the EU’s principles of proportionality and subsidiarity, the functioning and funding of IGS should be left to the discretion of member states. This is to reflect the substantial differences between the social welfare systems, winding-up processes for insurers and insurance product lines in member states.

Any further work at European level should therefore be outcome-oriented and not seek to harmonise the organisation or funding of IGS.

Published 29 October 2018