“The review of Solvency II offers the opportunity to fix problems in the framework so that it properly reflects the real risks faced by insurers, and to reduce operational burdens. Doing so would enable insurers to invest more in the economy, provide more long-term savings products and protection to customers, and to be more competitive on the international stage.

“This is why it is disappointing that EIOPA has published an opinion to the European Commission that ignores this potential and would instead make Solvency II even more conservative, without proving that overall capital levels are currently too low. In fact, the advice would, in the long run, result in a less competitive European insurance industry that could invest less in the economy and provide fewer long-term savings products and offer lower returns to customers. Such an outcome is completely unnecessary and must be avoided by the co-legislators - the European Commission, the European Parliament and the Council of the EU - who will decide the changes that the review will introduce to the current framework.

“While Solvency II overall works well, it is widely recognised that important areas do need improvement. These are the treatment of long-term business and reducing excessive operational burdens. Work to address the flaws in the treatment of long-term business can and should be done in a way that removes barriers and helps to facilitate the Commission’s ambitions in key projects such as the Green Deal and the Capital Markets Union. EIOPA’s opinion would not achieve this and overall risks increasing barriers rather than reducing them.

“Operational burdens can be reduced by making proportionality work and by streamlining reporting requirements. This will reduce costs for consumers and allow insurers and supervisors to focus on the material risks faced by the industry, while also supporting a diverse range of large and small insurers in the market. While EIOPA’s opinion in this respect is a helpful step in the right direction, it needs important improvements in order to get proportionality to fully work in practice and to avoid increasing the reporting burden.  

“Finally, it is important that the review only focusses on the parts of Solvency II that really need to be fixed, and not on an overhaul of the framework, which is what EIOPA’s very extensive list of potential changes seems to envisage. The industry therefore calls on the Commission to take an approach to the review that reduces the number of problems in Solvency II, instead of one that increases them.”