Supervisors have raised concerns about the potentially higher financial risks derived from the reform of the insurance sector proposed by the Commission with its ‘Solvency II’ package.
The new risk-based system introduced by ‘Solvency II’ presents a concrete advantage for companies that can dispose of higher amounts of money to invest and compete in an increasingly globalised market. One of the predicted consequences of the new rules is a merger and acquisition boom in the sector.
The Commission aruges that a more dynamic insurance market will make European companies more robust and more capable of facing difficult periods, bringing clear advantages for customers.
However, supervisors fear that increased dynamism could also bring about higher competition and thereby cause more bankruptcies as an unwanted consequence. “We realise that a risk-free system does not exist,” acknowledged Mick McAteer of CEIOPS, the Committee of European Insurance and Occupational Pensions Supervisors.
“However, in a system based on the risk of insolvency for each insurance player once every 200 years, we have to underline that even only one bankruptcy affects consumers’ confidence,” he said during a conference in Brussels organised by CEA, the European insurance and reinsurance federation.
Internal Market Commissioner Charliee McCreevy reiterated that the proposed directive is based on “the best approach” and that it should remain unchanged. In a speech at the CEA conference, he also underlined the “fundamental differences between banking and insurance” made evident by the recent financial turmoil, which affected banks but not insurers.
The Commission’s flexible approach towards the solvency of insurers is accompanied by a tougher line towards debtors. Yesterday, Commission Vice-President Franco Frattini, who is responsible for Justice and Home Affairs, launched an EU-wide consultation aimed at increasing the transparency of debtors’ assets, mainly in relation to cross-border debt recovery.