22 MEPs voted in favour of the text, with seven against and four abstentions. The most significant of the over 800 amendments tabled related to the issues of group supervision and capital requirements.
Stronger group supervision
MEPs specifically asked for the mandatory creation of supervisory colleges, gathering all the various national supervisors responsible for each financial group and its subsidiaries. This, they say, will facilitate cooperation, exchange of information and consultation between supervisors.
They also introduced changes to the arrangements for handling disagreements between group and subsidiary supervisors in different member states.
Stressing the importance of a subsidiary's risk profile when calculating a group's capital requirements, MEPs said it was important to give the European supervisory authority CEIOPS (Committee of European Insurance and Occupational Pension) a mediatory role among group and subsidiary supervisors.
The committee should be authorised to make rulings in disputes and to force group supervisors to "comply or explain", they stressed.
But the issue of cross-border supervision is hotly disputed by a number of countries, which fear it will lead to a loss of power for national authorities. What is more, Eastern European countries, most of which do not have a big insurance industry, fear that the reform of the insurance sector focuses too much on big multinationals' interests.
While they accept that the principles of group supervision and geographic diversification should be applied even to their smaller mutual insurance companies, they say they should also be allowed to maintain a different status.
In substance, they believe the opportunity to spread risk among subsidiaries should also be given to mutuals, even if these do not actually have any subsidiaries, only relationships with equal partners.
Clearer capital requirements
MEPs also decided to amend criteria on the amount of capital that insurance companies should hold. According to them, the Minimum Capital Requirement (MCR), which defines the point at which a company's lincence would be withdrawn, should be set at between 25-45% of a company's Solvency Capital Requirement (SCR), rather than between 20-50% as suggested by the Commission.
Governments under pressure
As the current financial crisis picks up pace and the fall in equity prices impacts upon insurers, the Commission is pushing for a quick deal on what is already on the table, arguing that "if we fail, we will not have a second chance for a long time".
The French Presidency still hopes for a deal with Parliament by the end of the year. For this to happen, member-state finance ministers must reach an agreement at their next meeting on 4 November, which seems unlikely given the large disagreement on the issue of group supervision.
