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Insurance Europe is the European insurance and reinsurance federation. Through its 34 member bodies — the national insurance associations — Insurance Europe represents all types of insurance and reinsurance undertakings.
Its comprehensive annual report looked all the major issues facing the industry. It highlights the risks and dangers facing insurers after a welter of regulatory measures- 130 or more Commission initiatives in the past five years.
The report's foreward outlines the challenges:
'A sophisticated, risk-based regulatory regime that correctly reflects the financial strength of European insurers is something the industry and its customers can clearly support. Yet if the design or calibrations that underpin that sophisticated regime — Solvency II — are inappropriate, the damage to insurers and the economy could be immense. Insurance Europe has worked hard over the last year to contribute to solutions that ensure the regulation will provide the peace of mind that insurance customers need, while avoiding unnecessary costs for customers and without distorting financial markets and causing damage to fragile economies. Some important improvements were made to the Directive and we hope that the insurance industry’s comments are also taken into account in the final version of the delegated acts of the new legislation.
Likewise, it appears laudable to put forward legislative proposals intended to ensure that customers are provided with the information they need to be able to take an informed decision about which policy to buy. That is until all the proposals are put together and the result is buyers facing a bewildering mass of information that actually prevents them from seeing the important elements when choosing their products. Insurance Europe has worked hard to highlight the risk that consumers could be overburdened with information and that inconsistent or overlapping rules could be created. The federation will continue to oppose initiatives that discourage consumers from paying attention to key elements such as coverage, guarantees, exclusions and excesses.
And in the broad reforms being proposed to the EU’s legal framework for data protection, we again see laudable aims — in this case harmonising legislation, strengthening individuals’ rights and reducing the administrative burden on businesses. Yet the broad reforms have been designed without considering their impact on specific sectors, such as insurers’ data-processing activities. Those activities lie at the core of insurance underwriting and risk assessment, so the legislative proposals could adversely affect the availability of insurance cover, to the detriment of consumers.
Elsewhere we have continued to see policymakers turning to proposals to make compulsory certain types of insurance — such as environmental liability cover or insolvency cover for airlines — to guarantee that everyone has insurance cover. Again, at first sight, this can appear to be the right solution, yet if the risks are too difficult to quantify and insure, mandatory cover can lead to a drop in insurance capacity and range, creating the opposite effect to that intended.
Finally, looking beyond the EU to international initiatives, in the ambitious plans of the Financial Stability Board and the International Association of Insurance Supervisors to create a set of international capital standards for insurers, we see a very tight timetable proposed. Here we are concerned that this timetable does not allow sufficient time for comprehensive impact assessments. If we think back to the development of Solvency II in Europe, the creation of that regulation — which was admittedly more detailed — included no less than six impact assessments and took far longer than the timetable set for these international standards. Insurance Europe also believes that something as important as international capital standards needs to be specifically created for the sector and cannot be copied from standards in other financial sectors.
It is clear from these examples, all of which are covered in more detail in this Annual Report, that the unintended consequences that legislative proposals can have on our industry can be due to a lack of information about how insurance works. Perhaps the biggest ongoing challenge faced by Insurance Europe is to increase understanding about the role of insurance, its benefits and how its unique business model works. In particular, we devote significant resources to explaining how that model differs substantially from those of other financial sectors, such as banking or the asset management industry, and why rules created for those other sectors cannot simply be copied and applied to insurance. If they are, unintended consequences are the result."