Filenews 25 September 2021 - by Theano Thiopoulou
Rules for insurance companies to be able to increase long-term investment in Europe's recovery from the COVID-19 pandemic, the European Commission has approved. The review also aims to make the insurance and reinsurance sector (i.e. insurance of insurance undertakings) more resilient so that it can cope with future crises and better protect policyholders. In addition, more simplified and more proportionate rules will be introduced for some smaller insurance companies.
The European Commission notes in a communication that insurance is essential for many Europeans and for Businesses in Europe. They protect people from financial losses in the event of unforeseen events. Insurance companies also play an important role in our economy, it is added, by channelling savings into the financial markets and into the real economy and thereby providing long-term financing to European businesses.
The aim of the review, according to the Commission, is to strengthen the contribution of European insurance companies to the financing of the recovery, to the progress of the Capital Markets Union and to the channelling of funds to the European Green Deal. In the short term, funds of an estimated €90 billion could be channelled into the EU. This significant release of funds will help (re)insurers to increase their contribution as private investors to Europe's recovery from the COVID-19 crisis.
The amendments to the Solvency II Directive will be complemented by delegated acts at a later stage. The communication sets out the Commission's intentions in this respect.
Some key points of the package:
• The changes will better protect consumers and ensure that insurance companies remain steadfast, even in difficult economic times
• Consumers ("policyholders") will be better informed about the financial situation of their insurer
• Consumers will be better protected when buying insurance products in other Member States thanks to improved cooperation between supervisory authorities
• Insurance companies will be encouraged to invest more in long-term capital for the economy
• The financial strength of insurance undertakings will take better account of certain risks, including those related to climate, and will be less sensitive to short-term market fluctuations
• The whole sector will be better controlled so as not to jeopardise its stability.
Objectives of the new Directive on the reorganisation of insurance
The changes promoted by the Commission aim at the recovery and resolution of insurance companies and ensure that insurance companies and competent authorities in the EU are better prepared in cases of significant financial difficulties.
A new procedure for well-functioning consolidation will be introduced, which will better protect policyholders, as well as the real economy, the financial system and, ultimately, taxpayers. National authorities will be better equipped in the event of the insolvency of an insurance company. The proposals are largely based on the technical advice provided by EIOPA (European Insurance and Occupational Pensions Authority). They are also in line with the work carried out at international level on the subject, while taking into account European specificities.
