Today, the Council agreed its position (general approach) on amendments to the Solvency II directive, the EU’s main piece of legislation in the insurance area. The Council underlined that the insurance and reinsurance sector can provide private sources of financing to European businesses and can make the economy more robust by supplying protection against a wide range of risks. With this dual role, the sector has a great potential to contribute to the achievement of the Capital Market Union and to the financing of the green and digital transitions.
This review will make the insurance and reinsurance sector more resilient and prepared for future challenges, whilst stabilising insurers’ capital requirements, giving them room to manoeuvre in the short term.
The Council agreed its position taking stock of the progress in the discussions on the envisaged amendments to the delegated act achieved by the Commission, which should ensure a balanced review of the Solvency II prudential framework in terms of capital requirements.
The review also improves the protection of insurance policyholders through enhanced cooperation between supervisory authorities, and continues to prevent insurer failure, thus contributing to stability in the financial sector.
The existing legislative framework had been generally working well since the adoption of Solvency II in 2009, but improvements were proposed in September 2021 by the Commission. The revision notably aimed at improving proportionality, long-term guarantee measures, cross-border supervision issues and creating macroprudential tools.
In its position, the Council took the specificities of national insurance industries into account when it updated the capital requirements regime for the overall EU insurance industry. It also sought to strike the right balance when reducing the administrative burden on insurers, especially on small and non-complex companies, for example in the context of reporting requirements.
As regards the role of the European Insurance and Occupational Pensions Authority (EIOPA), the Council considered useful to assign new tasks to EIOPA:
- Preparing a report on the assessment of risks related to biodiversity loss by insurers, along with natural disasters and climate related risks, consistently with the European Green Deal;
- Defining consistent guidelines for national rules followed by insurers when assessing their macroprudential risks, i.e. risks impacting an entire sector or the economy as a whole.
On 22 September 2021, the Commission transmitted to the Council its proposal to amend the Solvency II directive. The proposal aims to review the prudential framework applicable to the insurance sector in a comprehensive fashion, covering a broad range of topics, in particular:
- the proportionality of measures in consideration of the variety of undertakings being covered;
- the quality of supervision;
- long-term guarantee measures;
- macroprudential tools;
- adapting the framework to the European Green Deal;
- supervision of groups and of cross-border insurance business;
- and other issues including transitional measures.
The proposal was part of a package comprising also a directive establishing a framework for recovery and resolution of insurance and reinsurance undertakings, and a communication on the review of the EU prudential framework for insurers and reinsurers in the context of the EU’s post pandemic recovery.
EU economy and finance ministers had a policy debate on the proposal at the Ecofin Council of 5 October 2021. Work at technical level followed, with the aim of reaching broad agreement among member states on an updated version of the text. Now that the Council has agreed its position on the proposal, it is ready to start negotiations with the European Parliament in order to agree on a final version of the text.