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The EU rightfully has high ambitions to create a strong regulatory framework to protect citizens, the environment, and financial stability. However, it tends to create over-complicated, overly detailed and overlapping regulation developed in silos and ignore the growing accumulative costs and the risks of unintended consequences. EU Regulation impacting insurers has grown dramatically from 12 texts in 2012 to about 70 which are or will be applicable going forward. The complexity and level of detail have also increased with some texts, including their implementing acts and guidelines, comprising thousands of pages. Every piece of regulation requires resources and expertise to implement and to ensure ongoing compliance. Often many resources are needed as well as significant IT and data projects. This leads to substantial costs which must be passed on to customers, reduces capacity and ability to innovate and grow and reduces European insurers’ global competitiveness.
Existing regulatory burden needs to be streamlined and tangibly reduced
In 2023, the European Commission made an important commitment to rationalise and simplify reporting requirements for companies and administrations and to reduce such burdens by 25%. This has been repeated and reinforced with the mission letters to the new Commissioners, which took office on 1 December, which go even further and set the target for reporting reduction for SMEs at least 35%. The industry welcomes the European Commission’s recognition of the need to address the huge reporting burden which forms a substantial part of the overall excessive regulatory burden for insurers. For this to result in any material benefit, there must be a serious commitment with real changes. It is also encouraging that new Commission has placed an emphasis on the need for stakeholder dialogue to help these efforts.
So far, we have been disappointed that the proposals for streamlining reporting requirements presented by the European Commission in October 2023 would have almost no benefit for our sector. The main initiative the EC refers to for insurers is the postponing of the work to add sector-specific standards which the Corporate Sustainability Reporting Directive had required by 2024. However, this change was already known and is not a reduction but a delay in adding new requirements. The Commission also proposed adjusting the thresholds of the Accounting Directive to account for the impact of inflation which will take more smaller insurers out of scope of certain regulatory requirements – but this is a normal and expected adjustment and only helps the very smallest of insurers, doing nothing for all the others. In the meantime, the regulatory pipeline keeps adding more significant new requirements, through the Solvency II Review, the Insurance Recovery and Resolution Directive (IRRD), the Digital Operational Resilience Act (DORA) and Retail Investment Strategy (RIS) and many others.
Therefore Insurance Europe provided a range of proposals in its response to the dedicated EC call for evidence identifying how to reduce current reporting burden, including in relation to the insurance prudential regulation framework, Solvency II, the conduct of business area, and sustainability. We will continue to develop these and other proposals.
The EU needs to fundamentally improve how it approaches and develops new regulation...
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