On 28 May, a virtual exchange of views took place between EC Executive Vice-President (EVP) Valdis Dombrovskis and Insurance Europe President Andreas Brandstetter. Overall, the discussion showed the need to ensure that insurance continues to feature on the busy agenda of EVP Dombrovskis, who is currently dealing with a myriad of complex policy objectives. In that respect, the meeting served to remind him, on the one hand, of the need to pay attention to issues of importance to the insurance sector and, on the other hand, to highlight the key role the insurance sector plays in helping the EC achieve wider EU policy objectives.
The exchange, during which Insurance Europe reiterated the industry’s key messages on Solvency II, COVID-19, and sustainable finance, was very constructive:
Solvency II
· The EC believes that Solvency II has worked, which is evidenced by the fact that the insurance sector remains robust and strongly capitalised in the wake of COVID-19. EVP Dombrovskis commented that rather than worrying about the financial sector the EC can now work with the financial sector in addressing the current crisis, which was not the case during the previous financial crisis.
· The EC is currently preparing its proposal for the Solvency II 2020 review, which will now be presented mid-2021 given the delay on EIOPA’s side. EVP Dombrovskis noted that the EC will look at Solvency II calibrations, bearing in mind Europe’s need for long term investment.
· He explicitly acknowledged that Volatility Adjustment (VA) poses problems, which should be addressed through a review of the Level I legislation. EVP Dombrovskis did not comment on risk margin but took note of industry views.
· He did note that the EC will not blindly follow EIOPA’s advise and stated that, as the prudential supervisor, EIOPA needs to maintain prudence. He consequently explained that the EC will be looking at the big picture and the best solutions for the economy at large.
· At the same time, EVP Dombrovskis confirmed that the EC will neither plan an overhaul, nor follow a deregulation agenda. Rather, the EC will aim to make targeted changes and improvements to strike the right balance between keeping the framework safe and addressing its deficiencies. He encouraged Insurance Europe and its members to contribute to the EC public consultation on the Solvency II review that will be launched in the near future.
COVID-19
· EVP Dombrovskis expressed his gratitude for the insurance sector’s voluntary relief measures. He explicitly recognised that contractual obligations ought to be respected and that retroactive coverage should be avoided. At the same time, he expressed concern about the “uneven” picture when it comes to the relief measures launched across Member States. Against this backdrop, the EC is currently exploring whether more EU-level coordination could be helpful, and he encouraged insurance Europe to remain engaged in these discussions.
· He considers Business Interruption as one of the key business lines that require attention but is also aware of the need to find the right balance between helping businesses in trouble and maintaining the stability of the insurance sector.
· Looking ahead, EVP Dombrovskis is interested in discussing how systemic risk could be addressed in the future. He would be especially keen to better understand the opportunities of public private partnerships in this regard but would need to be convinced of the viability of solutions moving forward. He also noted that it will be important to address the question of how these solutions should be financed.
Sustainable Finance
· Welcoming the insurance industry’s strong commitment to the green agenda, EVP Dombrovskis underlined how the newly launched €750 billion recovery fund is compatible with the EC’s climate targets. He said that he considers the insurance sector a natural partner, not least given the sector’s expertise in risk analysis and its exposure to the impact of climate change. He highlighted the importance for the EC to be able to continue to count on the insurance sector’s green commitment.
· He mentioned that the EC will not only be looking at the costs in terms of greening the economy, but also at how high the cost of non-activity would be. EVP Dombrovskis is convinced that the costs of the latter would be higher.
· Finally, he confirmed that the EC’s sustainable finance action plan will be published in Q3 2020 and that the Non-Financial Reporting Directive (NFRD) proposal will be published in 2021.
Next steps
It was agreed to keep the dialogue on these topics going forward and for Insurance Europe to continue
the active and constructive engagement with EVP Dombrovskis’ cabinet and services.