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Trilogue on Solvency II: Insurers need more scope for investment

GDV CEO Jörg Asmussen emphasizes the importance of Solvency II for sustainable economic transformation, but warns against overly strict requirements that could hinder investment in transformation.

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At the start of negotiations between the EU institutions on the European prudential framework for the insurance sector, GDV CEO Jörg Asmussen emphasized the importance of Solvency II for the green transition of the economy. "Solvency II has proven its worth since its introduction. However, overly restrictive requirements leave little room for investment in the transformation that is so important," says Asmussen.

He continues that the trilogue negotiations offer the opportunity to make targeted improvements to the Commission's proposal, especially regarding the extrapolation and volatility adjustment of the yield curve. "Solvency II has to work in any interest rate environment, so adjustments to account for negative interest rates, as proposed by the Commission, make sense in principle," Asmussen says. "However, the tightening on the extrapolation of risk-free interest rates clearly overshoots the mark."

Concerns of smaller insurers hardly taken into account

The association is disappointed with the new framework for smaller insurers. It is not very  practicable, especially for the German market. "The Commission's proposal to grant relief to insurers with a low risk profile is the right impulse," says Asmussen. However, he adds, the criteria used to determine these insurers are far too restrictive for larger markets.

"We expect that only a very small number of German insurers will benefit from these  more proportionate requirements", Asmussen says. Unfortunately, neither co-legislator has taken up this point, he adds. The association is therefore calling for  a review of the Directive every five years with regard to the definition of low risk profile undertakings, he says.

Avoid duplication of reporting obligations

By contrast, the GDV supports  the proposal that companies with a low risk profile should be subject to simplified sustainability reporting requirements. The German insurers also expressly endorse the proposals for greater consideration of sustainability risks in under Solvency II. However, no requirements should be imposed that are already anchored in other European initiatives, such as transition plans. "Duplicating very similar requirements in different sets of regulations only leads to confusion, unnecessary additional work and bureaucracy", says Asmussen.

With the start of the trilogue negotiations, the Commission, the Council and the European Parliament are finalizing the review process of the Solvency II framework adopted in 2016. Their introduction was also accompanied by a defined evaluation period to review the impact of the rules and adjust them if necessary. This is now being done as part of the ongoing review process. At present, it is still unclear whether the negotiations will be completed before the European elections in June 2024.

Recovery and resolution plans: No blanket solutions

In addition to the start of the trilogue on Solvency II, insurers are eagerly awaiting the upcoming negotiations on the Insurance Recovery and Resolution Directive, which among other things provides for mandatory recovery and resolution plans for the insurance industry. The GDV believes that preparing for future crises is a sensible measure for companies and supervisory authorities. However, the association does not consider blanket requirements that disregard the specific risk an individual company poses to financial stability to be helpful.

Moreover, appropriate account should be taken of the safeguards already in place in Member States, Asmussen highlights: "There are already national safeguards, for example Protektor for life insurance in Germany, which have established themselves in the system."

Christian Ponzel (© Christian Kruppa / GDV)
Christian Ponzel
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