This summary and the accompanying exchange of letters between the insurance industry representatives group and Commissioner Barnier highlights a potentially serious problem which could impact the final developments of the Solvency II project.

The vast majority of responses noted the potential impact of implementing measures on long-term products with guarantees and that this would primarily affect consumers saving for retirement and pensions. Respondents stressed the important role of insurers as providers of private pensions, particularly given the demographic challenge currently faced by many Member States. It was stressed that if Solvency II results in insurers ceasing to offer long-term products, there would be increased pressure on social security systems to fill the pensions gap. It was recognised that a further consequence would be increased investment by consumers in unit-linked products or variable annuities as a cheaper alternative to long-term insurance with guarantees.

Other critics have argued that there could be an increase in investment in cheaper unregulated products. The commentary looks at the responses and asks whether Solvency II could act as de facto product regulation measure working against ‘socially useful’ products?