CEA seeks consultation on applying Solvency II principles to IORPs

Principles of new EU solvency regime for insurers should apply to pension funds

From 2013, EU insurers will be subject to what is widely regarded to be the world's most state-of-the-art regulatory regime: Solvency II.

As things stand, when insurers move to the sophisticated new Solvency II regime, the institutions for occupational retirement provision (IORPs) that are currently subject to the same regulation as insurers — Solvency I — will continue to be regulated under that cruder old system.

The current regulatory level playing field will cease to exist, meaning that customers whose pensions are with institutions for occupational retirement provision (IORPs) or with mutual funds offering guaranteed benefits will not benefit from the enhanced protection that will be afforded by Solvency II.

The CEA, the European insurance and reinsurance federation, calls on the European Commission to tackle the confusing inconsistencies that could arise in the regulation applicable to EU pension providers. It believes that the principle of “same risks, same rules” should be applied to the regulations covering life insurers, IORPs and mutual funds offering guaranteed benefits.

“The Solvency II principles are appropriate for pension funds, provided the economic features of all pension products or schemes are taken into consideration,” said Michaela Koller, director general of the CEA.

The CEA therefore calls on the EC to urgently carry out consultations and an impact assessment on the application of Solvency II-type, risk-based principles to IORPs.

The CEA is the European insurance and reinsurance federation. Through its 33 member bodies - the national insurance associations - the CEA represents all types of insurance and reinsurance undertakings, eg pan-European companies, monoliners, mutuals and SMEs. The CEA, which is based in Brussels, represents undertakings that account for around 95% of total European premium income. Insurance makes a major contribution to Europe's economic growth and development. European insurers generate premium income of over €1,050bn, employ one million people and invest more than EUR 6,800bn in the economy.