Solvency II regulation will enhance policyholder protection

05 May 2009
by eub2 -- last modified 05 May 2009

The CEA, the European insurance and reinsurance federation, welcomes today's formal approval of the Solvency II Framework Directive by the EU's Economic and Financial Affairs (Ecofin) Council.

"The new regulation's focus on more sophisticated risk management is great news for the insurance industry and consumers," said Michaela Koller, CEA director  general. "Solvency II incentivises insurers to use the most advanced risk management practices, which means greater consumer protection. This is welcome news in these times of economic crisis."
 
The regulation is also beneficial for policyholders because the capital that insurance companies are required to hold is more closely linked to the risks the insurers face. Promoting the optimal alignment of capital and risk among insurers will also affect how insurance products are designed and priced, stimulating the creation of more innovative and competitive products.
 
Furthermore, Solvency II introduces harmonised disclosure and reporting requirements for Europe's insurers, providing more transparency and  comparability for insurance buyers across Europe. Harmonised solvency regulations in the EU will also foster a single market, thereby encouraging more competitive pricing and increasing the scope for European-wide products.
 
"European insurers are delighted  that the modernised regulatory system that they have long advocated will now become reality," said Alberto Corinti, deputy director general of the CEA. "Solvency II represents a huge leap forward, creating a harmonised, risk-based regulatory regime for Europe."
 
"We look forward to presenting Solvency II to  insurance regulators around the world, as the global debate continues on enhancing supervisory regimes and policyholder protection," added Koller.
 
Solvency II is a Framework Directive, and preparatory work is already underway on the Level Two implementing measures that will provide the  detail of the Directive. The CEA is already contributing to the consultations on these measures, to ensure that the best possible supervision of Europe's insurers is achieved.
 
Background
Solvency capital requirements for EU insurers have been in place since the 1970s. Following a review required by the third generation Insurance Directives of the 1990s, limited reforms, known as Solvency I, were agreed by the European Parliament and the Council in 2002. The European Commission adopted the Solvency II proposal for a more fundamental and wider ranging review in July 2007 and an amended proposal on 26 February 2008.
 
The Solvency II Framework Directive was agreed informally on 26 March by the Committee of Permanent Representatives. The European Parliament voted in favour of the Directive on 22 April.
 
The Directive is due to be transposed by 31 October 2012.

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 approximately 94% of total European premium income. Insurance makes a major contribution to Europe's economic growth and development. European insurers generate premium income of EUR 1,122bn, employ one million people and invest more than EUR 7,200bn in the economy.

CEA - the European insurance and reinsurance federation