‘SII does not need prudential enhancements' - Insurance Europe president

Written by Adam Cadle

29/01/2020

Solvency II, one of the world’s most prudent and conservative prudential regimes, according to Insurance Europe president and CEO and chair of UNIQA Insurance group Andreas Brandstetter, “does not need prudential enhancements”.

Speaking today at a conference organised by the EC on the 2020 review of Solvency II, Brandstetter stated that “what Solvency II needs today is a targeted and focused review, in three areas: reducing barriers to long-term business and investment, making proportionality work in practice and reducing the burden of reporting”.

In addition, Brandstetter said that fixing issues with how Solvency II treats insurers’ long-term business is vital.

“This means addressing the problems of measurement and capital treatment for long-term savings and guarantees are lower than Solvency II currently assumes,” he underlined. “Capital is calibrated above what is actually justified by the risks. This matters because, in many cases, it can lead to consumers simply no longer having access to the products that they value.”

Making proportionality a practical reality – rather than a theoretical principle is also key, he argued.

“Proportionality is an important overarching principle included to avoid unnecessary costs which ultimately customers pay for. Today, very little proportionality is applied in practice. This must be addressed so that the framework really works for all entities to reduce costs and preserve a diversified and competitive European market, for the benefit of consumers.”

On the regulatory side, Brandstetter said meaningful reductions must also be made to the regulatory reporting burden to streamline and simplify reporting requirements.

“Reporting requirements are not only overly burdensome, but significant elements of them are simply not used. We must therefore identify what information is actually useful for supervisors and consumers. For example, merging templates without reducing content increase costs and does not reduce the reporting burden.”

Brandstetter concluded: “Europe has been set on an ambitious path towards a sustainable future, and the insurance industry can and should be a key contributor. We have the ability to support Europe’s goals, and play a key role in the transition to a sustainable economy. We can only do this to our full potential if we get Solvency II right."

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