29 May 2017

EIOPA’s response to the European Commission on its public consultation on the operations of the European Supervisory Authorities

During EIOPA’s first six years of operation, much progress has been achieved to promote a stronger and more integrated regulatory framework in the European Union. Moreover, EIOPA has fostered more consistent regulation and a higher level of supervision, ensuring better protection of consumers.

The Commission’s consultation raises important issues on possible improvements to the existing supervisory framework. An open discussion on these issues is key to ensuring that EIOPA is able to make further progress on supervisory convergence and to enhance consumer protection and stability in the internal market. This open discussion should also tackle if targeted amendments to EIOPA's regulation are needed.

To ensure sound and effective supervision of the insurance and pensions sectors EIOPA strongly believes in a holistic and integrated approach towards European prudential and conduct of business supervision.

Insurance and pensions business models necessitate the interlinkages between prudential and conduct of business supervision. Long term promises and variable allocations of risks between insurers and policyholders strongly link the profitability and solvency of the company and the fair treatment of its customers. Recent history has shown how conduct failings can lead not only to consumer detriment but also solvency issues and contagion risks, while the pursuit of solvency can in a crisis put policyholder interests at risk.

EIOPA’s regulation and its governance structure have been fit for the purpose of fulfilling EIOPA’s regulatory mandate. Following the implementation of Solvency II, supervisory convergence is one of EIOPA’s strategic priorities. The aim is to support concrete improvements in the quality and consistency of supervision.

However, further progress on supervisory convergence needs to be made, which could require in some areas refinements to the regulation.

This necessity has been given fresh urgency by the implementation of Solvency II and the increasing number of cross-border cases and failures, which amplify risks to consumers and the stability of the financial system. In this respect, the ability to passport services should imply at the same time a sound supervision of such activities throughout the Union. Only strong European responses are able to counter these negative developments, and provide the consumer with additional safeguards. Therefore, EIOPA’s regulation should be strengthened with a mandate to act more intrusively when it detects signals of risks of cross-border failures.

EIOPA believes that, apart from regular reviews, an effective control of the application of equivalence decisions should be considered. This should be underpinned by technical analyses in the context of a framework for agile monitoring. Going forward, a comprehensive equivalence assessment should include the initial equivalence assessment of a third country regulatory and supervisory framework, the follow-up necessary to assess that the frameworks are being implemented as expected in the equivalence assessment, and the monitoring of upcoming changes in the country’s regulatory and supervisory framework taking place once equivalence has been granted.

Full response

© EIOPA