25 November 2014

4th annual conference of EIOPA

Participants shared views on prospects for the long-term financing of the economy, the role of the new EU Pensions Directive, the challenges of the Solvency II implementation and other regulatory and supervisory developments.

In his opening speech Gabriel Bernardino, Chairman of the European Insurance and Occupational Pensions Authority (EIOPA), spoke about strategic priorities of EIOPA for the upcoming years focusing on Solvency II implementation, on adequate, safe and sustainable pensions for European citizens and on risk-based regulation and supervision of conduct of business.

Session I: Long-term Financing of the Economy – Sustainable Growth?

The panel focused on challenges, risks and opportunities for investors when considering to invest in long-term and rather illiquid assets. Panellists also discussed whether institutions with long-term liabilities are particularly prone for such investment classes. Conference participants pointed out that major obstacles of investing in long-term assets are the availability of appropriate assets and the ability to manage the relevant risks. The tendency “to search for safe assets” seems to shape the current investment landscape. It was noted that large firms are considered to have greater access to long-term assets than smaller companies, amongst others, also due to their financial as well as risk management capacity.

Session II: Pensions – Does the New EU Pensions Directive Reflect the Needs of IORPs in Europe?

It was emphasized that pension schemes should give sustainable promises. At the same time conference participants were unsure that the current workers will get the proper pension level once they retire.

Conference participants agreed that the review of the IORP Directive is a step in the right direction, but it cannot be done very quickly. It was noted that the key position to improve practices with regard to the treatment of cross-border IORPs is with EIOPA.

Session III: Solvency II – From regulation to supervision

Participants discussed challenges and benefits of Solvency II implementation and emphasised EIOPA’s role and instruments, as well as the industry’s views and investors’ perspective.

Among the biggest challenges both regulators and industry named Pillar I capital requirements, Internal Model approval and the potential lack of well skilled human resources. In addition, companies listed among biggest challenges the implementation of Pillar III reporting requirements and the establishment of a meaningful own risk and solvency assessment (ORSA). From consumer prospective the implementation of a sound governance system and structure in the organisation was seen as the biggest concern as well as disclosure requirements.

An academic study presented, came to the conclusion that the insurance sector is much more active cross-border than banking and pointed out the importance of Solvency II’s consistent implementation across the EU and the crucial role of EIOPA in this.

Also Industry participants assessed the role of EIOPA positively, which sets a landmark in risk-based regulation for the (re)insurance sector in the EU and its role in the Solvency II implementation is widely acknowledged. This is eventually supposed to replace a multitude of national sectoral regulations and instructions by common European standards and guidelines. 

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