On 26 June, insurers, policymakers and regulators attended Insurance Europe’s Solvency II Conference. The theme of the conference, which was held in Brussels, was ” Two years on and two reviews”.
Michaela Koller, Insurance Europe director general opened the conference, which featured two panel debates. The first debate “Two years on – Solvency II in practice” discussed the positive and negative effects of Solvency II (SII) with speakers Alberto Coriniti, member of the board of directors at the Italian Institute for the Supervision of Insurance (IVASS); Hans De Cuyper, CEO of AG Insurance, Belgium; Frank Grund, Chief Executive director of insurance and pension funds supervision at the German Financial Supervisory Authority (BaFin); and Ismael Moreno, Chief Risk Officer, VidaCaixa, Spain.
Some of the questions put to the panel, and their responses were:
Please share your experiences of your respective markets on SII implementation. How have those markets coped with the getting ready for the new regulatory framework?
- BaFin and IVASS were generally contented with SII implementation. Alberto Coriniti did point out that more work was needed from firms and regulators. He recognised regulators had focussed heavily on the approval of internal models and authorisation generally, which meant they were very familiar with those firms. This created a gap and an opportunity for regulators to understand and help those firms who sought authorisation using the standard model. Mr Coriniti said that the right level of governance would be needed for such firms.
- Alberto Coriniti interestingly said that the change from Solvency I to SII was not easy for regulators as it required a change of mind-set.
- Ismael Moreno commented that new functions have emerged as a consequence and that he has seen risk management becoming much more embedded within the industry and an accepted part of a firm’s day to day operation.
Have you noticed any changes to products since SII implementation?
- There has been a shift towards long guarantees like unit linked products in the Spanish local market. Ismael Moreno queried whether insurers were now supposed to be competing with asset and fund managers given that this appears to be a trend developing across Europe.
- An increased appetite for retirement type products with consumers.
- Alberto Cristini commented on the trend towards long guarantee products in Italy, which he felt was not fundamentally beneficial for consumers or insurers in the long term and where greater attention from the regulators would be needed.
- The panellists all agreed that the shift towards long guarantee products was not driven by SII alone. They acknowledged the impact of the social and economic landscape, e.g. low interest rates and consumers who are looking for products that will offer an investment either side of retirement age.
Are the similar issues with non-life products?
- The panellists did not think so but Frank Grund said that the standard formula was not working well for legal protection products.
The second session, ” Two reviews – achieving Solvency II’s potential ” discussed how the 2018 and 2020 reviews can achieve SII’s potential. Speakers on the panel were: Nathalie Berger, Head of the European Commission’s insurance & pensions unit, Gabriel Bernardino, chairman of EIOPA, Lionel Corre, deputy director of insurance at the French Treasury; Luigi Lubelli, Group chief financial officer of Generali, Italy and Immo Querner, Chief financial officer of Talanx, Germany
The key points to note are:
- in terms of the role of insurance, insurers were said to be the risk managers of our society; protecting the assets and well-being of consumers as well as supporting growth and development of business;
- the cost of capital is becoming a driver for insurance companies. The speakers agreed that SII had led to an increase in unit linked products;
- there were no concerns from a regulatory or supervisory perspective that regulators and policymakers were creating a burden on firms with capital requirements. Nathalie Berger said the question was to consider whether the right level of capital was being held and that comparisons should not be made between US and European insurers. Decisions on capital requirements reflected the position of European decision makers in respect of their professionalism, expertise and knowledge. More importantly, SII was seen as the world lead in terms of prudential requirements but that did not mean that policymakers should not be open to revisiting the framework to achieve the right balance; and
- call for information to EIOPA to prepare the groundwork for future work on the 2020 review. The call for formal advice would be sent to EIOPA before the end of 2018 or beginning of 2019 so EIOPA has sufficient time to respond and for the Commission to consider those responses.