Insurance Europe calls for Solvency II changes

In its response to the Capital Markets Union (CMU) consultation, lobby group Insurance Europe has called on the European Commission to work on changes to the Solvency II framework.

Insurance Europe warned that Solvency II remains a key regulatory challenge for insurers, because it wrongly assumes that insurers act like traders and are fully exposed to market volatility, therefore forcing them to hold unnecessarily high capital. As such, Insurance Europe calls on the Commission to clarify the extent to which Solvency II recognises that insurers are often not exposed to short-term volatility in market movements. Also, the Commission should investigate if the current Solvency II assumption that insurers would be forced to sell their entire portfolio at a huge loss in a time of stress is reasonable and backed by evidence.

In addition to addressing Solvency II prudential barriers, the Commission should support the development of suitable assets in which insurers can invest, such as infrastructure and private placements. For instance, private placement markets have been developing significantly in several member states. The Commission should identify best practices in this area and promote them more widely across the EU.

In the area of infrastructure, while significant improvements have been noted in recent years on the supply side, concerns remain on issues, such as the risk of public support crowding out private investment. This needs to be addressed by more focus on additionality in the use of public money, according to Insurance Europe.

In the area of consumer protection, Insurance Europe urges the Commission to address the negative consequences of information overload and duplication for consumers and the mandatory default paper requirements for disclosures. Identifying a clear path and timeline to address these problems would be a decisive step towards making insurance regulation digital-friendly and future-proof, the statement said.

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