29 January 2020

Insurance Europe: Solvency II 2020 review.

Excessive conservativeness hinders insurers’ ability to help Europe’s transition to a sustainable economy and to provide the long-term products their clients demand, according to Insurance Europe president and CEO.

Speaking at a conference organised by the European Commission on the 2020 review of Solvency II, Insurance Europe president and CEO and chair of UNIQA Insurance Group, Andreas Brandstetter, says:

"Solvency II is good, but it is not perfect, and the 2020 review is the right opportunity to improve it. However, we definitely don’t need to revolutionise the framework, or to develop solutions to problems that do not exist. To be blunt, it is very difficult to see why one of the world’s most prudent and conservative prudential regimes needs prudential enhancements. What Solvency II needs today is a targeted and focused review, in three areas: reducing barriers to long-term business and investment, making proportionality work in practice and reducing the burden of reporting."

Mr Brandstetter mentions also these issues:

• Fixing issues with how Solvency II treats insurers’ long-term business is vital. This means addressing the problems of measurement and capital treatment for long-term savings and guarantees, as these are the products needed to close Europe’s pensions gap and support Europe’s long-term sustainable investment needs.
• Solvency II’s measurement and calibration of long-term business is not in line with the actual risks that it poses.
• Making proportionality a practical reality — rather than a theoretical principle — is also key.
• Meaningful reductions must also be made to the regulatory reporting burden to streamline and simplify reporting requirements.
• While low and negative rates are a current reality, it is impossible to predict precisely how much more negative they may go. Although EIOPA has attempted to make such predictions, insurers would argue that its projections are entirely theoretical, extreme and unjustified.
• There is a global framework for systemic risk – but EIOPA has proposed ideas to gold-plate it in Europe. Given all the protection already offered by Solvency II, this makes no sense and is definitely not helpful to EU insurers’ global competitiveness.

He concludes: "Europe has been set on an ambitious path towards a sustainable future, and the insurance industry can and should be a key contributor. We have the ability to support Europe’s goals, and play a key role in the transition to a sustainable economy. We can only do this to our full potential if we get Solvency II right."

Full press release on Insurance Europe

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