EU Insurance Regulator Seeks Expanded Powers
In light of the increasing international interconnectedness in the insurance industry, the head of the EU insurance regulator, EIOPA, is advocating for more authority for the Frankfurt-based body. Petra Hielkema expressed this desire at an EIOPA conference in Frankfurt, stating that early intervention is required if national supervisors fail to protect consumers. Hielkema insisted that the EIOPA Administrative Board, consisting of the 27 heads of national supervisory authorities and herself, should at least possess the same powers as national-level authorities in such scenarios.
The Dutch regulator is optimistic about the potential changes following the upcoming EU Parliament and Commission elections, viewing these as an opportunity to modernize both the regulatory framework and supervisory practices. The industry's responsibility for long-term investments necessitates current supervisory systems to cope effectively with the impending changes.
According to Hielkema, around 10% of premium income stems from cross-border business, with the figure continually rising. Insurers can operate within the EU with their national licenses while the supervisory authority only operates in the respective country. This disparity results in inefficiencies or dysfunctions, such as unsustainable business models and poor coordination between home and host-country supervisors. In such situations, the EIOPA Administrative Board should have the capacity to promptly intervene and protect consumers' interests.
Enrichment Insights:
EIOPA has the potential to strengthen its regulatory capabilities in several ways:
- Enhanced RTS and ITS: EIOPA has proposed modifications to Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS), which focus on alterations to the Solvency II review process and include standards for cross-border supervision, insurer liquidity management, and identifying sector-wide shocks.
- Boosting Supervisory Tools: The Amending Directive to Solvency II empowers national competent authorities, including the ability to request pre-emptive recovery plans from insurers and address material liquidity risks.
- Macroprudential Analysis: EIOPA is currently consulting on criteria for national supervisors to request macroprudential analyses from insurers and insurance groups. This collaboration aims to align with financial stability reporting criteria and promote supervisory judgement and risk-based considerations.
- Sustainability Risk Management: EIOPA is mandating insurers to establish sustainability risk management plans that encompass governance arrangements, policies for identifying, assessing, managing, and monitoring material sustainability risks.
- Data-Driven Supervision: ESMA, another EU financial regulator, is enhancing its data capabilities and promoting innovation through initiatives like the ESMA Data Platform and AI-powered supervision tools. These developments can support EIOPA's oversight by offering more advanced data analysis.
- International Coordination: IAIS, the International Association of Insurance Supervisors, has adopted the Insurance Capital Standard (ICS), which provides a risk-based measure of capital adequacy for internationally active insurance groups. By collaborating with IAIS, EIOPA can ensure consistent application of these standards across the EU and globally.
- Enhanced Cross-Border Supervision: The Amending Directive to Solvency II significantly increases cross-border supervision by requiring national competent authorities to intervene when substantial cross-border activities are involved. This ensures that activities are relevant to the market in the host Member State.
By implementing these strategies, EIOPA can significantly bolster its capacity to oversee the international insurance industry, fostering improved financial stability and risk management across the EU.
