The Council of the European Union (EU) and the Parliament have come to a provisional agreement on amendments to the Solvency II directive, which they say will “boost the role” of the re/insurance sector and make it a more resilient and prepared industry for the benefit of policyholders.
After a review of Solvency II following the identification of potential areas of improvement, the Commission proposed to amend the Solvency II directive and also proposed the establishment of an Insurance Recovery and Resolution Directive (IRRD).
A news report from Reinsurance News, an industry-focused online medium, indicated that recently, the Council and Parliament reached a provisional agreement on amendments to the directive, and also new rules on IRRD.
The Council expressed optimism that the new rules on Solvency II “will boost the role of the insurance and reinsurance sector in providing long-term private sources of investments to European businesses.”
It also projected that these rules will make the re/insurance space more resilient and better prepared for future challenges, all with a view to better protecting policyholders.
It further stated: “With this dual role, the sector will contribute to the achievement of the Capital Markets Union, to the financing of the green and digital transitions and Europe’s economic recovery form the COVID-19 pandemic.”
The Council also explained that the goal of the IRRD was to make sure that re/insurers and relevant authorities are better prepared in cases of significant financial distress.
The new rules focus on channelling funds for businesses, greater resilience and stability, consumer protection, and new tasks for the European Insurance and Occupational Pensions Authority (EIOPA). The IRRD rules focus on an orderly resolution in case of insolvency and the introduction of a new regime at European level for resolving insurers in an orderly manner.
According to the Council, the provisional agreements will be finalised and presented to member-states’ representatives and the European Parliament for approval after which the Council and the Parliament will formally adopt them, if approved.
In response, the Federation of European Risk Management Associations (FERMA) has lauded the efforts of the parties involved for reaching a provisional agreement on the amendments.
It stated: “Since as early as 2019, FERMA has formally engaged with the 2020 review of the Solvency II Directive. Most recently, FERMA called on the Spanish Presidency to spearhead a charge to finalise the political negotiations on the file.
“FERMA has consistently raised the flag on behalf of captives. Our priority throughout has been to encourage lawmakers to use the opportunity of the Solvency II review to make the regulation more proportionate. In particular, in response to the European Commission’s call for feedback in 2021, FERMA pushed for an automatic classification for captives as so-called “Low-Risk Profile Undertakings”, the group added.
