EU finance ministers will put the idea of group supervision of the insurance sector on ice at today’s (2 December) monthly meeting in Brussels, despite many commitments to improve the financial control of multinationals.
The French EU Presidency decided to “put aside” the issue of group supervision from the draft Solvency II Directive after failing to reach a compromise in the Council. “With 14-15 delegations against, we had to take into account this political reality,” explained a French diplomat ahead of today’s Ecofin meeting.
Currently, supervision of insurance and reinsurance groups is carried out at national level, even when the company is active in different EU member states and is headquartered in another country. This leads to increased red tape for companies and poor results in supervising their operations, as witnessed by the financial crisis. Indeed, national supervisors realised the scope of the inadequacy of the system only when the crisis dramatically hit Europe.
To tackle the situation, the Commission proposed so-called ‘group support’ supervision in the insurance sector. Under such a system, ad hoc teams of national supervisors would control cross-border groups, such as Generali or Axa. The supervisory authority of the multinational company’s country of origin (Italy for Generali or France for Axa) would have a clear mandate above other national supervisors, thereby guaranteeing a clear decision-making process.
This is regarded by many as a cumbersome process in comparison with a single EU supervisor, but it would guarantee better coordination than at present. However, it seems that the Council is moving towards opposing the concept of group support supervision, instead favouring the minimalistic approach of setting up a college of supervisors, in which national supervisory authorities would be required to cooperate but would have the last word in disputes.
According to experts, this choice will not much change the present situation of poor and fragmented EU financial supervision, but will take into account the position of many small member states, which are worried about losing control of the balance sheets of their biggest banks.
MEPs have already shown that they are in favour of the Commission proposal on group support supervision (see Background). “Now an agreement at first reading seems less likely,” a Parliament spokesperson told EURACTIV. The vote is expected in February. Unless the scenario changes, the positions of the EU’s legislative institutions is that a new reading will be necessary after the first vote, possibly after the end of the current Parliament’s mandate.
Hopes are now converging on the work of the De Larosiere high-level group on financial supervision, which is set to give its first advice to the spring European Council in March 2009 (see Background).