EU Solvency II regs look set to be changed in the near future, according to the feeback from Insurance Europe, the Federation association that represents many of the bigger insurers across the EU. But just like the UK changes on Solvency II, any relaxation of capital holdings as reserves seems unlikely to actually benefit the insurance brands in any significant way.
Instead the spare cash will be funnelled into more Net Zero, “green” or ESG and infrastructure projects. Schemes like power generation or social housing, that many would think were the job of government to plan, fund and carry out, not the private sector. If you’re thinking these propsed EU rule changes are simply a means of rebranding a mandatory green/ESG tax upon business, rather than giving companies the power to fund their own growth, or create EU based high wage jobs and new products etc then you’d be correct.
Here’s the word.
The review, which began in February 2019, adjusts how the EU’s insurance and reinsurance industry is prudentially regulated. Insurance Europe’s Director-General, Michaela Koller commented:
”Since day one, European insurers have supported the goal of creating a regulatory framework that works for consumers, works for businesses, and works for Europe. The changes can enable the sector to better serve customers and unlock more investment into the European economy supporting the green and digital transitions. Solvency II is and will remain the gold standard in customer protection’.
Insurance Europe welcomes the changes which address some of the existing measurement flaws in Solvency II and which result in more appropriate capital requirements and lower volatility. Insurance Europe’s Deputy Director-General, Olav Jones, said, ”These changes can reduce unnecessary regulatory barriers to offering the long-term products, guarantees and investments customers want and need. They can help the industry to remain key long-term investors who act as a stabilising force during periods of market volatility’’.
Nevertheless, pointing to the next “Level 2″ stage of technical discussions that will start next year, Olav Jones added that, ”The devil is in the detail and in order to realise the potential benefits, the political ambition agreed yesterday must be reflected in the technical details which will follow. ”
The insurance industry supports the inclusion of further sustainability elements that are risk and evidence based and look forward to reviewing the co-legislators proposals in more detail. Finally, Insurance Europe welcomes the effort to better embed the proportionality principle – this should reduce excessive burdens for small and non-complex insurers. At the same time, the industry regrets that for most companies, the overall impact of the review will be an increase in operational burdens and reporting contrary to the European Commission’s wider commitment to reducing reporting burden by 25%.
FEEDBACK FROM MANUFACTURERS ON EU REPORTING BURDEN
On the outcome of the trilogue negotiations on the Corporate Sustainability Due Diligence Directive (CSDDD) VDMA Managing Director Thilo Brodtmann (PICTURED) comments:
“With today’s agreement in the trilogue for a European Corporate Sustainability Due Diligence Directive, the EU is delivering the next nail in the coffin for the international competitiveness of European industry. The EU Council of Ministers is therefore called upon to pull the emergency brake and reject the compromise.
During the negotiations on CSDDD there have been no trace of Ursula von der Leyen’s announcement that European companies would be relieved of 25 per cent of bureaucratic reporting obligations. Instead, even medium-sized companies are now being obliged to investigate every last corner of highly complex and widely ramified supply chains. This goes far beyond what is regulated in the German Supply Chain Act, especially as companies are also threatened with civil liability under the European directive. And the Supply Chain Act is not an isolated case, but is one in a long line of other bureaucratic excesses from Brussels that have to be shouldered by small and medium-sized industrial companies.
This far too far-reaching European regulation will not strengthen human rights outside Europe. Instead, European companies are more likely to withdraw from difficult markets in order to reduce a risk that they can no longer control.”
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