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CEA questions EC proposals on insurance guarantee schemes

13 July 2010
by CEA -- last modified 13 July 2010

The CEA, the European insurance and reinsurance federation, supports the objective of protecting insurance policyholders and beneficiaries that underlies the package of measures the European Commission has published today. Nevertheless, the CEA has concerns over the EC’s proposals for EU legislation to create guarantee schemes to fund potential insurer insolvencies.


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As part of today's package, the EC has published a White Paper setting out a framework for EU action on insurance guarantee schemes (IGS). This proposes a Directive to ensure that all EU member states have an IGS that complies with a set of minimum requirements.

As demonstrated during the recent financial turmoil, the risk of insurer insolvency in the EU is low. The CEA firmly believes insolvencies will become even less likely once the EU's enhanced regulatory framework, Solvency II, comes into force at the end of 2012.

"We are convinced that Solvency II, being a risk-based regulatory regime, increases the level of consumer protection, but nevertheless recognise the European Commission's objective of safeguarding consumers even in the most extreme circumstances," said CEA director general Michaela Koller.

Should the EC decide to go ahead with a legislative initiative in this area, the CEA supports its proposal of minimum harmonisation of national schemes. This would accommodate existing national systems that function well and are adapted to local conditions and consumer needs.

However, the CEA questions pre-funding of IGS as suggested by the EC, and believes that the decision on how to fund schemes should be left to individual EU member states provided that equivalent protection is given to policyholders.

Koller said: "Attention must be paid to ensure that IGS, combined with the other initiatives envisaged by the Commission, does not place a disproportionate compliance burden on the insurance sector, which would in turn be to the ultimate detriment of consumers."

The EC is running a consultation until 30 November and the CEA will be providing the Commission with detailed comments on its proposals.

Background

The High-Level Group chaired by Jacques de Larosière that was set up by the EC to make proposals on financial services supervision in the wake of the economic crisis recommended in its final report of March 2009 the setting up of harmonised IGS throughout the EU.

The White Paper on IGS published by the EC today as part of a package to boost consumer confidence in financial services is accompanied by an impact assessment. The consultation on the White Paper runs until 30 November.

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 €6,800bn in the economy.

CEA, the European insurance and reinsurance federation
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