The European Commission adopted a review of Solvency II

On Wednesday, the European Commission adopted a comprehensive review of EU insurance rules known as "Solvency II". One of the goals is to enable insurance companies to invest more in the long term in rebuilding Europe after the new coronavirus pandemic. Another objective of the review is to increase the resilience of the insurance and reinsurance sector (insurance companies that provide insurance to other insurance companies) so that the sector can manage future crises and better protect policyholders. Simplified and more proportionate rules will be introduced for certain smaller insurance companies. The Commission recalled that insurance companies play an important role in the EU economy by redirecting savings to financial markets and the real economy, providing long-term financing for European businesses. The EC review consists of several elements, in particular a legislative proposal to amend the Solvency II Directive and a legislative proposal for a new Directive on insurance recovery and resolution. The aim of the review is to increase the extent to which European insurers contribute to the financing of reconstruction following the corona crisis, the completion of the Capital Markets Union and the channeling of funds to the Europe Green Agreement. In the short term, capital of up to € 90 billion could be released in the EU. The release of such an amount will help insurers and reinsurers to make a greater contribution than private investors to the recovery of Europe following the COVID-19 pandemic. As a result of the proposed changes, consumers will be better protected and it will be ensured that insurance companies remain viable even in difficult economic times. Policyholders will be better informed about the financial situation of their insurer and consumers will be better protected when they decide to purchase an insurance product in another Member State, thanks to better cooperation between supervisors. Insurers will be motivated to invest more in long-term capital for the needs of the economy and their financial strength will take better account of certain risks, including climate-related risks, and will be less prone to short-term market fluctuations. The entire insurance sector will be better controlled to avoid jeopardizing its stability. The aim of the Insurance Recovery and Resolution Directive is to ensure that insurers and competent authorities in the EU are better prepared for serious financial difficulties. A new crisis management procedure will be introduced, in which policyholders, the economy, the financial system and also taxpayers will be better protected. National authorities will have better options in case an insurance company declares insolvency. The Commission's proposals are largely based on technical advice provided by the European Insurance and Occupational Pensions Authority (EIOPA). The package of legislative proposals was sent to the European Parliament and the Council of the EU (ministers of the member states) for discussion.