Will there be a revision of the Solvency II Directive?
The European Parliament has published a briefing on the impact assessment around Solvency II (Directive 2009/138/EC on the taking-up and pursuit of the business of insurance and reinsurance).
The European Commission has identified five issues that it considers to be material and that will be considered in more detail in the course of the impact assessment:
- incentives to contribute to the long-term financing and environmental performance of the European economy are limited;
- insufficient risk sensitivity and limited ability of the directive to mitigate the volatility of solvency positions;
- lack of proportionality of prudential regulations, which cause high compliance costs, especially for small and low-risk institutions;
- Shortcomings in the supervision of (cross-border) insurance companies and groups and insufficient protection of policyholders against insurer defaults;
- limited specific supervisory tools to address the potential buildup of systemic risk in the insurance sector.
The impact assessment concludes that negative effects on the economy as a whole and on consumers are to be expected without EU intervention. Accordingly, it sheds light on the impact of various EU measures under consideration.
While adjustments due to increasing ICT risks (risks in the context of information and communication technologies) were also taken up by the public during the consultation phase of the Solvency II review, the Commission refers to existing measures. Examples include the Digital Operational Resilience Act (DORA) and the regulatory framework for cyber resilience. More details on the regulatory framework can be found here
in our Regulatory Update of March 2022.
An adjustment of the Solvency II Directive seems likely, so insurance and reinsurance companies should prepare themselves for this.
You can find the briefing of the European Parliament here on its website.
You can find the Impact Assessment of the European Commission here on their website.
Source: © European Union, 2022 – EP