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“It is imperative that Solvency II measures the right risks and takes into account how the largely long-term nature of the industry’s liabilities and hence the investment strategies affect those risks”, said Sergio Balbinot, president of Insurance Europe. “Otherwise the amount of capital that insurers are required to hold will be needlessly increased and unnecessary volatility will appear in insurers’ balance sheets.”
Significant efforts have gone into finding solutions and the insurance industry has supported a package of measures to address the problems related to long-term guarantees. If implemented correctly, these measures would reflect the way in which insurers manage their long-term business, ensure that the risks to which their balance sheets are exposed are not overstated and avoid unnecessary balance-sheet volatility.
Insurance Europe welcomed the decision to carry out an impact assessment to test some of these measures before the finalisation of Solvency II. EIOPA’s report on the study confirms very strongly the need for adjustments to Solvency II and provides valuable insight into the types of solutions that work well across the diverse European markets and those that do not.
EIOPA has also put forward, based on its findings, some proposals for a set of improvements to the current Solvency II framework that it believes could ensure Solvency II captures adequately the benefits of the long-term perspective. Insurance Europe’s preliminary review raises significant concerns that the measures proposed would not work as intended. “We will examine carefully EIOPA’s report and proposals, explaining our concerns and identifying the adaptations that are needed to avoid unnecessarily damaging insurers’ ability to provide long-term guarantees and invest long-term”, said Balbinot.
The industry remains committed to supporting efforts to correct the outstanding problems with Solvency II and to finalising the regime as soon as possible.