Solvency II reform nearing completion: EU establishes reliable framework for insurers

“Overall, we can work well with the revised capital requirements,” said Jörg Asmussen, Chief Executive of the German Insurance Association (GDV). “The balanced outcome of the review provides insurers with a stable and reliable foundation for long-term business planning.”

Stability through adjusted interest rate Parameters

With the revision of Solvency II, the European Commission aims to further develop the existing supervisory regime to enhance both consumer protection and the financial stability of the insurance sector. The GDV notes positively that the Commission has improved the calculation method for long-term interest rates compared to its earlier draft.
This correction enables a more reliable assessment of long-term liabilities and strengthens the system’s stability. This is particularly important for life insurers with long-term investment horizons. “Thanks to the adjusted parameters, insurers can continue to rely on sound calculation methods,” said Asmussen. This gives companies planning certainty and allows them to continue offering long-term guarantees to their customers.

No new requirements on sustainability risks for now

The GDV also welcomes the fact that the Commission will not, for the time being, adopt additional technical standards under Solvency II regarding transition plans for sustainability risks. “Sustainability is of central importance to the insurance industry. These risks are comprehensively addressed in Solvency II through the company-specific risk assessment, the ORSA,” said Asmussen. To avoid unnecessary bureaucracy, the European supervisory authority EIOPA should also refrain from imposing additional reporting requirements when further refining the technical specifications.

More practicality needed for smaller insurers

Despite the overall positive assessment of the regulation, the GDV sees untapped potential to ease the burden on smaller insurers. Although the regulation includes a catalogue of specific relief measures, the criteria for application are too complex and impractical. As a result, the relief provided is barely noticeable.

Outlook

Following the Commission’s adoption of the delegated regulation, the European Parliament and the Council have three months to raise objections. According to the GDV, this is not expected. Meanwhile, EIOPA is working on further technical standards and guidelines for practical implementation. The revised directive must next be transposed into national law.