The European Commission has launched a public consultation on the review of the EU's prudential rules for insurance and reinsurance companies, known as the Solvency II Directive.
The commission is seeking feedback from policyholders, consumer associations and financial stakeholders including, but not limited to, insurance and reinsurance companies and federations.
The Solvency II Directive, which came into effect in 2016, sets out harmonised, risk-based rules across the EU for insurance companies and promotes transparency, comparability and competitiveness in the sector.
In order to ensure that these rules are still fit for purpose, the commission is carrying out a comprehensive review of the prudential framework, building on the experience gained over the past few years.
The announcement noted that ongoing technical consultations and data collections with insurance and reinsurance companies are conducted by the European Insurance and Occupational Pensions Authority (EIOPA).
The commission also highlights that this review will give an opportunity to see how the insurance sector can contribute to the objectives of the European Green Deal and the Capital Markets Union, and the commission's overall efforts to ensure the EU's economic recovery following the COVID-19 crisis.
The consultation aims to address particular issues related to insurers’ role in the long-term financing of the economy and the supply of products with long-term guarantees to their clients, to their transparency towards the public, to policyholder protection and the European Single Market for insurance, and to emerging risks and opportunities (climate and environment-related risks, digitalisation and cyber risks).
It also noted that the review will take into account any lessons learnt from the COVID-19 outbreak and its adverse consequences on EU households, businesses and financial markets.
In addition to the consultation, the commission has also published an inception impact assessment. On the basis of feedback received, the commission will come forward with a legislative proposal in the summer of 2021.
Commenting on this, Valdis Dombrovskis, executive vice-president for an Economy that Works for People, said: “Europe's insurance companies are and will remain one of the largest investors in our economy. They help us manage the risks that we face in today's uncertain economic climate. Our world-leading prudential regime, Solvency II, has ensured that our insurance sector remains resilient, despite the current challenges posed by the coronavirus pandemic.”
“However, it is right and timely to ask whether these rules are still fit for purpose. Specifically, we want to find out if they still provide the right incentives for insurers to support the long-term financing of a strong, sustainable and resilient economic recovery in the EU, while ensuring that consumers' rights are protected,” Dombrovskis added.
The deadline for feedback is 21 October 2020.
On 23 June, the UK Government revealed it will bring forward a review of certain features of Solvency II in line with UK’s Brexit plans for adopting EU rules frameworks.
