SII reform falls short in making Europe more competitive, insurers warn

Written by Adam Cadle

05/09/2025

The European Commission’s (EC) draft Level 2 proposals for Solvency II (SII) do not reflect the level of ambition set by the co-legislators and the EC’s own political commitments to generate sustainable growth and competitiveness in the EU, Insurance Europe has warned.

Insurance Europe said the proposals fail to address artificial volatility. “A miscalibration of the volatility adjustment (VA) risk correction and a new, conservative and untransparent model for long-term interest rates leave insurers’ balance sheets overly sensitive to short-term market fluctuations,” it stated.

Furthermore, it warned that there is a missed opportunity to unlock trapped capital.

“Overly restrictive long-term equity proposals limit the sector’s ability to free up capital for long-term investment. While the proposed improvements to the risk margin are welcome, it remains out of step with other global regimes, leaving EU companies at a competitive disadvantage internationally.”

Finally, Insurance Europe said despite promised simplification, there are missed opportunities to make the extensive Solvency requirements more proportionate. It said the review will bring a raft of new additional requirements alongside significant new operational burdens.

Angus Scorgie, head of prudential regulation at Insurance Europe, said: “After many years of discussion, now is the time for the SII review to deliver on its promise: combining protection for policyholders and financial stability with growth and resilience for Europe’s economy and less red tape for insurers.

The Commission’s technical proposals do not live up to the ambitions of last year’s political agreement on the changes needed. Without improvements to the draft proposals, the review will fall short on strengthening European insurers' contribution to the financing of the EU’s priorities of competitiveness and growth.”

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