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Solvency II Review: a future-proof and balanced compromise for German insurers

With the trilogue agreement on Solvency II, the review process that began in 2020 is nearing its political conclusion. From the insurance industry’s perspective, a future-proof and balanced compromise has been reached.

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© Unsplash / Guillaume Périgois

From the perspective of insurers operating in Germany, the agreement reached in the trilogue negotiations between the EU institutions paves the way for a sustainable further development of the Solvency II supervisory framework.  "The review took even greater account of the risks arising from changes in interest rates, in particular the risks associated with negative interest rates - a lesson learnt from the economic developments of recent years," says Jörg Asmussen, Chief Executive Officer of the German Insurance Association (GDV), on the political conclusion of the review process, which lasted almost three years.

The GDV welcomes the fact that the Council, the European Parliament and the EU Commission have generally refrained from tightening the solvency requirements too severely. "Solvency II remains true to its foundations: a consistent risk-based approach that takes account of uncertain market developments," said Asmussen. "With the review, the strong solvency position of German insurers will continue in the future." However, important technical parameters have yet to be defined with the revision of the Delegated Acts.

Relief for smaller insurers

The introduction of a proportionality framework, which allows smaller and non-complex insurers to automatically apply simplifications, marks a significant step forward for the sector.  However, it remains to be seen how many smaller insurers in Germany will actually be eligible to apply proportional simplifications. "The agreed eligibility criteria are very restrictive in some cases; a larger scope of application would have been better here. It will largely depend on the practical implementation by supervisory authorities whether small insurers will really benefit from the new rules," says Asmussen.

Integration of sustainability risks

The further integration of the topic of sustainability into the Solvency II supervisory framework is a key priority for insurers. Measures that contribute to social and ecological transformation are important for the economy and society. The insurance industry is therefore in favour of providing clarifications regarding the inclusion of sustainability risks in Solvency II. "We insurers clearly see the risks arising from climate change. It is therefore right that this perspective is also anchored in Solvency II," said Asmussen.

Christian Ponzel (© Christian Kruppa / GDV)
Christian Ponzel
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