EU Commissioners Mairead McGuinness and Valdis Dombrovskis on Wednesday unveiled plans to relax capital rules for insurers to allow them to release 120 billion euros for long-term investments. The funds released would contribute to the economic recovery after Covid-19 and promote investments to achieve climate objectives, without reducing the protection of policyholders.
The European Commission is also proposing a harmonized approach across the Union for the rescue or liquidation of insurers in difficulty. It follows a complete overhaul of banking resolution following the financial crash.
Planned insurance reforms contemplate that investors in debt suffer losses – or be converted into shareholders – if an insurer encounters difficulties. But they do not replicate other post-crash banking sector reforms, such as the establishment of a single European resolution fund for troubled businesses, or an obligation for insurers to issue amounts and types. specific debt that could be “bailed out” during a crisis.
The Ministry of Finance and the Central Bank of Ireland edged ahead with the release of the EU’s plans by issuing a consultation paper earlier this month on a national resolution framework for insurers, asking whether the state should expand the role of the current Insurance Compensation Fund (ICF) or create an autonomous fund.
The Irish consultation paper invites comments from interested parties on whether provisions should be put in place to ensure that the levies imposed on insurers “are not directly imposed on policyholders”. However, industry watchers say the costs will ultimately be borne by consumers.
The Insurance Ireland lobby group said the EU proposal “falls short of” the ambition to have a harmonized EU-wide approach to the resolution. “The commission’s proposal focuses on national markets rather than the single market and could lead to inconsistencies and fragmentation,” he said.
Meanwhile, the commission’s proposal to change the capital rules, known as Solvency II and in effect since 2016, would free up € 90 billion in short-term capital and an additional € 30 billion in the long term. , according to a question-answer. document accompanying the advertisement.
For context, EU insurers had more than 10 trillion euros in assets under management at the end of 2020, according to the sector body Insurance Europe.
The aim is for the amendments, subject to approval by EU states and the European Parliament, to encourage insurers to invest in helping the EU economy as it recovers from the pandemic as well as ” invest money in green infrastructure and projects to help the EU achieve its goals. target to be carbon neutral by 2050.
“Today’s proposal will help the insurance industry to grow stronger and fully play its role in the EU economy,” said Ms McGuinness, Commissioner for Financial Services, Financial Stability and Insurance. capital markets.
“We enable investments in the recovery and beyond. And we encourage the participation of insurance companies in EU capital markets, providing the long-term investment that is so vital for a sustainable future. Our growing capital markets union is essential for our green and digital future. We also pay particular attention to the point of view of consumers; policyholders can be assured that they will be better protected in the future if their insurer encounters difficulties.