The Association of Mutual Insurers and Insurance Cooperatives in Europe (AMICE) has welcomed the overall success of Solvency II as a regulatory framework, and agrees with European Insurance and Occupational Pensions Authority’s (EIOPA) that this review should not result in a revolution, but in the adjustment of certain elements.
In its response to EIOPA’s call for advice for the 2020 review of Solvency II, AMICE stated that it is important that this is not used as an opportunity to increase the regulatory burden but it is an opportunity to improve the current system in the light of four years’ experience since its implementation in 2016.
After coming into effect in January 2016, the European Commission called for the EIOPA to provide technical advice for a comprehensive review of the Solvency II Directive in 2019 as the European captive industry had some issues with the regulations.
AMICE’s response follows a request by the European Commission, EIOPA in October 2019 who published an 878-page consultation paper which includes suggestions to update almost all aspects of Solvency II.
The association focuses on three topics from the consultation paper, they look at the review of the long-term guarantee measures; the potential introduction of new regulatory tools in the Solvency II Directive; and revisions to the existing Solvency II framework.
On the long-term measures and equity risk, AMICE has made several proposals to assist in achieving a proper reflection of the net risk profile of the long-term business model and issued two position notes with concrete proposals for easy-to-apply fixes for the volatility adjustment (VA) and long-term equity. They are particularly concerned that the VA and extrapolation proposals need to be tackled in line with stakeholders’ interests, as we have detailed in our response.
On macroprudential policies, AMICE suggested that the regulatory tools within the Solvency II system are ensuring a robust insurance sector and providing appropriate protection for policyholders.
Principle of proportionality, which is the main policy that the captive industry has had the most issues with. AMICE said it supports proposals to increase the thresholds at which Solvency II applies to small insurers, to apply an appropriately calibrated regime for medium-sized insurers, and to ensure that the principle of proportionality works consistently in practice.
AMICE’s secretary general, Sarah Goddard, commented: “Historically, AMICE has been deeply involved in the consultation around the development of Solvency II, particularly the implementation of the proportionality principle.”
“Proportionality is particularly important for the mutual and co-operative insurance sector, alongside more technical aspects such as long-term equity, the volatility adjustment and interest rate risk. We have highlighted these issues in our response to the Solvency II 2020 Review consultation.”
She continued: “This review is an important programme in ensuring that the European regulatory system works the way it should do, including fair treatment of all insurers, and AMICE has worked with members across Europe to ensure they are fully represented and their views appropriately reflected in our response. We look forward to a positive and ongoing dialogue with EIOPA and other stakeholders on regulatory reform.”
In a recent feature in Captive Insurance Times, Florian Wimber, head of European affairs and international insurance, Insurance Ireland, explains that as a next step, it will be “crucial that the industry develops concrete proposals on how Solvency II can be amended during the current review to better reflect the characteristics of captives and apply the principle of proportionality more consistently”.
EIOPA aims to release the revision papers later this year.
