Insurance Europe has urged the EU to grab the “golden opportunity” that the Solvency II review offers to unlock additional capital flow – and fuel – the insurance industry.
The organisation stressed that by increasing insurers’ investment capacity, the industry could further contribute to the political guidelines laid out by the recently re-elected president of the European Commission, which include increasing competitiveness, accelerating the green and digital transitions, and creating a more efficient capital market.
Last year, the EU announced the finalisation of its review of the current regulation, which key players and other stakeholders welcomed within the re/insurance industry. Currently, the EU is discussing the technical details necessary to implement Solvency II. The review has started in 2019.
However, Insurance Europe has reminded EU leadership that the details must closely reflect the political agreement made last year. In one of the technical papers that the federation published alongside its statement regarding Solvency II, it proposed the reduction of risk margin, the buffer European insurance companies are expected to hold in the rare case of insolvency, which currently reduces insurers' available capital by €141 billion.
“The buffer European insurance companies are expected to hold in the rare case of insolvency is excessive and unnecessary,” said Angus Scorgie, head of prudential regulation & international affairs and reinsurance at Insurance Europe. “When you consider that the current risk margin in Europe is up to three times greater than in the UK, twice as large as it is in Japan, and in the US, there is no risk margin at all, current European calibrations are holding back capital that Europe’s economy desperately needs.
“The Solvency II review is a golden opportunity for the newly re-elected President of the European Commission, Ursula von der Leyen, to deliver on her promises to unlock capital and increase competitiveness in the EU.”
Moreover, the re/insurance federation also called for “further improvements,” which is expected to reduce – at least by half – the size and volatility of risk margin, hence, increasing the industry's risk-bearing capacity by up to €70 billion. Insurance Europe also reminded the EU to remain true to its commitment to reduce the reporting and operational burden for the re/insurance industry by 25%.
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