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First, supervisory convergence
The implementation of Solvency II on 1 January 2016 will be a huge step forward for policyholder protection and the insurance single market in the EU. But this day will also mark the beginning of a new journey; a journey to ensure more consistent and convergent supervision in the EU insurance market, which is the duty of European Insurance and Occupational Pensions Authority (EIOPA). Thus, EIOPA’smain strategic focus for the upcoming years is to ensure supervisory convergence.
Why is supervisory convergence so important? Because it is essential to achieve three fundamental objectives:
Second, reinforcing preventive consumer protection
Conduct of business regulation and supervision are highly fragmented in the EU, and Member States are at different stages of development as regards their approach to consumer protection.
A strengthening of conduct of business supervision is important for consumers, for insurance undertakings and for the market as a whole, as it promotes the orderly functioning of markets resulting in a level playing field, a healthy competitive environment, increased consumer confidence and financial stability. An effective and efficient conduct of business supervisory framework contributes to a credible deterrence of market mis-conduct and allows for pre-emptive and proactive supervision by acting before a developing issue becomes widespread.
Third, preserving financial stability
In a challenging macro-economic and financial environment, with persistent low interest rates, the solvency position of insurers and pension funds and the sustainability of their promises and business models are clearly questioned.
For already several years, EIOPA has been devoting great attention to this risk with the aim of understanding and monitoring the implications of such an environment. A series of sequential actions have been taken such as the EIOPA Opinion on Supervisory Response to a Prolonged Low interest rate environment (2013) and the inclusion of a low yield module in the Insurance Stress Test in 2014. Clear recommendations were issued to NCAs.
Going forward, from a conceptual perspective, in order to mitigate the likelihood and the impact of a possible systemic crisis EIOPA has to pursue three objectives: