CEA calls for further work on Solvency II implementing measures
04 May 2010
CEA’s Michaela Koller warned against imposing overly conservative capital requirements on the insurance industry through the implementing measures. ”Excessive capital requirements would have harmful consequences for the insurance industry”, she said and called for changes in the QIS5.
The CEA, the European insurance and reinsurance federation, today reiterated its support for the EU’s new Solvency II regulatory regime but called for more work to be done on the Level 2 measures that will put the flesh on the bones of the Framework Directive. It also called for changes to the draft specifications for the fifth Quantitative Impact Study (QIS 5) that will be carried out later this year to test the likely effects of Solvency II on the insurance industry.
Speaking in Brussels at the European Commission’s public hearing on the Level 2 implementing measures, the CEA’s director general, Michaela Koller, said: “Although we welcome the modifications that the European Commission has already made to the implementing measures and the QIS 5 specifications, the proposed measures are still too conservative in many areas and much work remains to be done before they truly reflect the economic, risk-based principles that form the basis of the Framework Directive.”
“The fifth impact study is a vital element in the development of the new regulatory regime,” said Koller. “To achieve the level of industry participation in the exercise that the EC is seeking, and to ensure that it is an effective test of whether Solvency II is fit for purpose, it is vital that the specifications include appropriate solutions to outstanding issues.”
The CEA had serious concerns about the advice supplied to the Commission by the Committee of European Insurance and Occupational Pensions Supervisors (Ceiops) on the Solvency II implementing measures. It therefore welcomes the positive modifications made by the Commission, particularly in areas such as: the treatment of expected future profits; wider application of the liquidity premium; and the allowance for diversification between lines of business in the calculation of the risk margin.
Nevertheless, Europe’s insurers still believe that the proposed measures are too conservative in many areas, such as those affecting the calibration of the health and non-life underwriting risks, investment in corporate bonds and insurers’ participation in banks.
The CEA believes that further work also needs to be done on other aspects of the draft measures, namely on the appropriate allocation of the liquidity premium and on the concept of the fungibility of own funds in the group solvency calculation.
At the hearing, Koller warned of the dangers of imposing overly conservative capital requirements on the insurance industry through the implementing measures. “Excessive capital requirements would have unnecessary and harmful consequences for the insurance industry, for the economy and for society,” she said.
“The economic crisis cannot be used as justification for imposing excessive capital requirements on an industry that not only did not cause the crisis but also that withstood it well,” said Koller. She put this in the context of what the European insurance industry considers a worrying trend to regulate all financial services sectors in the same manner, failing to recognise the differences between the business models of the different sectors.
© CEA - Comité Européen des Assurances
