Insurance Europe has today published its response to a consultation by the European Commission on its roadmap for the Capital Markets Union (CMU) action plan.

Europe’s insurers welcome the objectives set out in the roadmap and highlight the following specific priorities:

• Address regulatory barriers to long-term and sustainable investment:
  • Focused improvements to Solvency II’s treatment of long-term business are required to ensure insurers can continue to provide long-term products and fulfil their role in supporting the EU’s investment needs for recovery, sustainable growth and transformation to a carbon neutral economy. The review of Solvency II must be ambitious and include targeted improvements to the Risk Margin and the Volatility Adjustment, as well as changes to equity and debt capital charges. It is also important to maintain the existing extrapolation method and parameters.
  • The Commission should ensure that the International Accounting Standards Board (IASB) provides an appropriate solution for the issue of recycling under International Financial Reporting Standard (IFRS) 9 – financial instruments.
• Increase availability of suitable long-term and sustainable assets:
  • Policymaker action is needed to stimulate the supply of assets that meet both sustainability criteria and quality and security requirements.

Furthermore, to improve the participation of retail consumers in the CMU, the Commission’s retail strategy should:

• Address consumer information shortcomings resulting from EU legislation:
  • Simple and accurate disclosures allow consumers to make informed investment decisions and facilitate their participation in capital markets. Any legislative reform – eg to the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation – must be adequately tested and evidence-based to ensure better outcomes for retail investors.
• Ensure legislation is appropriate for all providers and respects different sectors’ specificities:
  • Consumer participation in the CMU will be enhanced through regulation that accommodates the specific features of insurance products and distribution systems.
  • Rules on advice and inducements must be workable for all participants including smaller, local distributors who are often the point of access for retail customers.
  • Legislation should be technology-neutral and digital and innovation friendly, sufficiently future proof and ensure a level playing field among market participants.
  • The Commission and member states should take steps to improve consumers’ financial literacy.

In addition, to promote pensions savings and long-term growth:

• Further member state action is needed to promote well-balanced multi-pillar pension systems built on adequate, stable and attractive regulatory frameworks and tax treatment.
• The Commission must ensure that the Pan European Personal Pension Product (PEPP) is attractive to both buyers and sellers. The success of the PEPP will depend on many key issues that still need to be addressed by the European Insurance and Occupational Pensions Authority (EIOPA) and the Commission in the implementing regulation.

Further priorities highlighted by the insurance sector include promoting global competitiveness, as well as improving the efficiency and effectiveness of national insolvency proceedings and withholding tax procedures.