Speech | 22 September 2021 | Brussels | “Check against delivery”
Good afternoon, thank you Valdis for that introduction.
When we look back over 5 years when Solvency II came into being, back then it was really a major change in the European rulebook for insurers, aligning prudential rules with state-of-the-art risk management practices.
And Solvency II is a global leader, so we can be proud of our achievements in that regard.
Because Solvency II has provided a solid base for the single market in insurance, letting insurance companies operate across the EU and of course protecting consumers and businesses.
So again with some confidence: we are very happy with the way Solvency II has worked and today we’re looking at how to improve it further in this review.
I want to thank EIOPA for their work in implementing Solvency II and in particular their contribution to our review.
So today we have a chance to make improvements where needed, for example simpler rules for smaller and less risky insurers.
Public authorities will be better equipped to protect consumers and maintain financial stability.
And we want to make sure the insurance sector is more resilient so that it can weather future crises.
The economic and political context is evolving.
We have been through a major health crisis with serious economic consequences and we are now looking towards the recovery.
We also have a renewed and important focus on the Capital Markets Union and ensuring the single market for capital really works.
That means that this review of Solvency II is adjusting some rules to allow insurers invest for the recovery and for long-term, sustainable growth.
And we have the European Green Deal: where we are fighting climate change, while also helping our economies and societies to adapt.
Our mission is to allow businesses get more access to funding, beyond bank loans, and to build up our Capital Markets Union.
As Valdis has said, insurers are major institutional investors in the EU, and we believe they can play an even bigger role.
In the first few years after entry into force, this review will release several tens of billions of euros of capital for the insurance sector – allowing insurers to invest that money in the economy.
And with this package, we will make it less costly for insurers to invest, when such investments are made with a long-term perspective.
We will also improve the framework so that market volatility does not result in short-sighted investment decisions. Our businesses need long-term, stable capital funding.
However, as Valdis said, we should not forget that Solvency II needs to remain fit for the low-yield environment.
So today’s package will ensure that Solvency II better reflects the risks insurers are exposed to both in capital requirements and the rules on the calculation of insurers’ obligations towards policyholders.
We have ensured that the overall impact is not unduly burdensome. The review is well balanced in terms of capital requirements at EU level. Overall, insurers’ capacity to invest will increase.
The insurance sector also is vital for the European Green Deal.
Firstly in terms of providing sustainable investment with a long-term perspective to tackle climate change.
And secondly about adapting to the changes that are already happening.
I think this summer’s tragic events in Germany, Belgium and Greece remind us that the impact of climate change is already with us, and we need to be better prepared.
We will require insurers to fully take into account the risk of climate change in their investment and underwriting activities.
We will also ask EIOPA to assess whether a differentiated prudential treatment is justified, and whether natural catastrophe risk is still being properly addressed in view of climate science.
Beyond helping the insurance sector make its rightful contribution to our political goals, we want to make EU rules work better for insurers.
We will simplify Solvency II rules wherever possible, without putting at risk consumer protection.
More concretely, we will ensure that more small domestic insurers are exempted from Solvency II, so they are subject to simpler national regimes.
And we have introduced a simpler regime for firms that have a relatively low risk profile.
In addition, we have also identified some loopholes in the supervision of cross-border business, with some failures of insurers hurting EU citizens in several Member States.
So today’s package will close gaps in cross-border supervision.
In particular, EIOPA will have a stronger role, and there will be clearer responsibilities for the different authorities in charge of supervising cross-border insurers.
We are also introducing a recovery and resolution framework for insurers.
The new regime will help ensure a better outcome for policyholders should their insurers fail, while minimising the impact on the economy, the financial system and European taxpayers.
So in closing, I want to highlight the importance of the insurance sector, already identified by Valdis.
Insurance and insurance companies allow households and businesses to prepare for a rainy day.
While at a broader level the sector can help us recover from the crisis, and build up the Capital Markets Union and support the European Green Deal.
It is important that we get the rules right: we think they are already good, and now we want to make them better.
We are now counting on the support of the European Parliament and Member States. And I look forward to working with them.
Compliments of the European Commission.