19 November 2014

EIOPA strategic priorities going forward

Gabriel Bernardino, Chairman of EIOPA, delivered the welcome speech at the EIOPA 4th Annual Conference in Frankfurt.

“In my intervention I will touch upon three of the main strategic priorities of EIOPA going forward and the key challenges that we face dealing with them: 1) Solvency II implementation and an EU supervisory culture; 2) How to deliver adequate, safe and sustainable pensions to EU citizens and 3) The path towards risk-based regulation and supervision of conduct of business. Solvency II is certainly not a perfect regime. But it is a landmark and EIOPA will be always linked to it.

We are now approaching a point in time where the priority is naturally shifting to the implementation of the regime across all the EU Member States. The challenge will be to ensure that Solvency II is implemented in a consistent way throughout the EU. This requires effective and convergent supervision in all Member States in order to prevent regulatory arbitrage and guarantee a level playing field.

Bearing in mind the aforementioned, EIOPA will put a strong emphasis on the promotion of supervisory convergence by contributing to upgrade the quality and consistency of national supervision and strengthening oversight of cross-border groups. Strong and credible supervision is needed across the EU. Preventive supervision and timely enforcement contribute to healthy market competition and are critical to avoid consumer detriment. EIOPA will use all the tools at its disposal to deliver on this objective.Going forward, as part of a step-by-step approach, there are a number of refinements that will contribute to ensure more efficient supervision and a stronger EU supervisory culture:

• EIOPA should be tasked with a centralised oversight role in the on-going monitoring of internal models
• EIOPA’s capacity to provide independent and challenging feedback on supervisory practices to the NCA’s should be enhanced
• EIOPA should play a coordinating role on insurance matters towards the Single Supervisory Mechanism in order to ensure a more consistent approach to the supervision of financial conglomerates and avoid supervisory arbitrage

In the medium term, consideration should be given to assign to EIOPA an enhanced supervisory role for the largest important cross-border insurance groups.

The low interest rate environment continues to be at the top of the risks for the insurance sector. The perspectives of maintenance and even reinforcement of the accommodative monetary policy send a clear signal. Companies seem to have started to adapt to this new reality, both by changing the mix of products and diversifying their investment choices. Portfolio diversification could be good news provided insurers reinforce their capacity to understand and manage the “new” risks. In fact further investment diversification, in a controlled environment, could minimise the sometimes excessive concentrations in sovereign and banks.

Our monitoring activity suggests that, up to now, there is some evidence of a “search for yield” but there is no evidence of significant changes in the overall portfolio of insurers. The investment choices seem to continue to fall within the risk-bearing capacities. Nevertheless we observe some trends: increased investments in infrastructure and interest in direct lending, changes in the mix of the bond portfolio between sovereigns and corporates and reinvestment in lower grade bonds, increased exposure to emerging market securities and a marginal increase in equity exposures. ”

Full speech

© EIOPA