The theme of this event “Supervision: Guarantor of the insurance market’s credibility” is extremely relevant both from an economic and a public policy perspective. A credible and stable insurance industry is one of the basic preconditions for a functioning economy. Appropriate regulation and supervision are fundamental elements to ensure such credibility and stability.
In the aftermath of the financial crisis it is a clear political objective to reinforce the regulation and supervision of the financial sector in order to promote financial stability and strengthen consumer protection, supporting the public confidence and the trust by citizens. That’s why among the priorities of the Greek Presidency’s work programme is the safeguarding of financial stability and the restoration of confidence in the financial sector.
In the insurance and pensions areas this political commitment is reflected in the evolution of the EU regulatory framework, in particular with Solvency II, and in the responsibilities entrusted to EIOPA as part of the European System of Financial Supervision...
This year we will make use of another regular supervisory tool – the stress test for the insurance sector. The aim of the exercise in 2014 will be to test the resilience of insurers regarding market risk under a combination of historical and hypothetical scenarios. Additionally, insurance risk will be tested and, as a follow-up to its Opinion on Supervisory Response to a Prolonged Low Interest Rate Environment, EIOPA will also include a low yield element in the exercise. The exercise will be launched on 30 April and in November we intend to release its results. But more needs to be done. Looking at the challenges ahead I think that we need to create the appropriate conditions for EIOPA to perform an independent assessment of the way the regulatory framework is implemented in practice in the different Member States. This independent assessment is a key component for the development of consistent supervisory practices in the EU and to ultimately build an EU supervisory culture. EIOPA will move in this direction, using its powers within the current EU Regulation.
Nevertheless, I believe that in the review of the European System of Financial Supervision that is going to take place this year, the EU co-legislators should consider to extend the current power of EIOPA to conduct an inquiry into a particular type of financial institution, type of product, or type of conduct, in order to support the independent assessment of supervisory practices. Furthermore, EIOPA should obtain access to the individual company information included in the harmonised templates developed for Solvency II in an efficient way.
It is also necessary to enhance the mandate of EIOPA: our power to ban or restrict financial activities needs to be brought to life. It would also be of added value to grant EIOPA a centralised oversight role in the field of internal models. In the medium term, as part of a step-by-step approach, consideration should be made to assign EIOPA an enhanced supervisory role for the largest important cross-border insurance groups.
We will of course closely observe all the developments related to the ESFS review and will hope that the European Union decides to benefit from stronger and more coordinated supervision at European level.
I believe that insurance is one of the economic activities with higher growth potential in the third millennium. In fact, the evolution of the society is creating more and more risks and citizens and businesses will be looking to transfer or mitigate them in an efficient way. This is precisely the role of insurance.
Furthermore, we will face increased demand for retirement savings products. Budget sustainability is inevitably reducing the generosity of social security systems, creating higher demand for 2nd and 3rd Pillar private savings solutions. With the improvement in longevity there is also a growing awareness that the costs of longer life expectancy will increasingly fall on households – we will need to save more in order to maintain sustainable levels of living after retirement.
By moving towards a better alignment between risk and capital, promoting good risk management practices, fostering transparency and reinforcing supervision, the new insurance prudential regime in the EU will provide citizens with a high level of protection, trust and confidence in the sector, ultimately creating conditions to develop a sound,credible and sustainable business.
The euro area crisis has been a catalyst for needed economic reforms in many countries. From an insurance perspective I think the crisis should also be used as an opportunity to restructure the insurance market and to strengthen its transparency and efficiency. I am confident that the Greek authorities will continue to take concrete steps in this direction in the coming years.
Going forward, strong and efficient supervision of the insurance and pension markets will avoid regulatory arbitrage, create a level-playing field and enhance the long-term potential of the market.
Full speech
© EIOPA
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article