Insurance Ireland and its Dutch counterpart have called for a proportionality toolbox for Solvency II.
The toolbox would ask help Solvency II to include the same regulatory standards and oversight upholding consumer protections; simplified requirements to reflect the nature, scale and complexity of risks insurers and the markets they serve; and ensure consistent application of regulatory principles.
It is also noted that the minimum threshold for Solvency II application needs to be increased from €5 million to €10 million and for small and medium-sized insurers with premium incomes between €10 million and €50million a set of measures applying Solvency II in a proportionate manner should be introduced in the European Solvency II supervisory framework.
According to Insurance Ireland, it and the Dutch Association of Insurers believe that the 2020 Solvency II review is an opportunity to achieve this in the interests of the markets these insurers serve.
A statement from Insurance Ireland said: “Proportionality is a guiding principle in insurance regulation to ensure insurers, especially smaller firms, do not face requirements that are disproportionate to the nature, scale and complexity of the risks they manage or the materiality of their business lines.”
“Both insurance representative associations believe these proposals would help ensure proportionality works in practice, particularly for small- and medium-sized insurers.”
Richard Weurding, general director of the Dutch Association of Insurers, commented: “The capital requirements of the Solvency II directive do not change with this proposal.”
“The supervisory framework remains the same, however, the reporting requirements and administrative requirements would be more proportionate. This means for instance, that it will no longer be obligatory under certain circumstances to have an actuary employed and the requirements for the annual ‘Solvency and Financial Condition Report’ will be reduced to reflect the company’s characteristics.”
Kevin Thompson, CEO of Insurance Ireland, added: “This proposal recognises the need for appropriate supervision of insurers with different risk profiles while providing strong protections to policyholders.”
“The Solvency II review is an opportunity to ensure the principle of proportionality works in practice and is consistently applied across Solvency II and across EU Member States. In particular, small and medium-sized entities, including certain captives, will benefit from a European-wide and consistent application. Applying Solvency II proportionately is in the interests of consumers as well as the EU single market for insurance.”