EIOPA Chair Petra Hielkema has written to Commissioner Albuquerque on the Commission’s draft Level 2 amendments for Solvency II. While welcoming that many of EIOPA’s technical recommendations were taken on board, the letter expresses strong concerns about the extensive capital relief that would result from the Level 1 agreement combined with the proposed Level 2 changes.
In the letter, EIOPA underlines that:
- The amendments would lead to a significant reduction of quantitative requirements, which is “not technically justified”.
- The risk margin of insurance liabilities would be reduced by 39%, going beyond what was necessary according to the Level 1 agreement.
- Lowering requirements to this extent could erode the sector’s resilience, with freed-up capital “missing when a next crisis hits the sector”.
- The combination of reducing resilience while incentivising risk taking is “particularly concerning” in today’s economic and geopolitical uncertainty.
The letter concludes that Solvency II has proven to be a solid foundation through past market turbulences and stresses that any revision must be risk- and evidence-based, keeping in mind the core objectives of policyholder protection and financial stability.
Insurance Europe