Perspektiv på utveckling av försäkringsreglering på EU-nivå
A starting point to any discussion on insurance regulation must be the initiatives at the global level following the financial crisis. The International Association of Insurance Supervisors (IAIS) has been working to develop a global approach to insurance supervision, of which a part is to define a global Systemically Important Financial Institution from an insurance perspective.
These tasks have been challenging because unlike the banking regime which has a global regime on risk-based capital in the form of the Basel Committee, insurance has not seen such harmonisation. The result is big differences in capital standards, group supervision, and regulatory treatment, all of which does not bode well for firms operating globally.
Developing Regulation at the EU Level
In the light of this global backdrop, the primary purpose of EU regulation is to create certainty for firms operating within and across the various member states. The drafting of such pan-EU rules must encompass several key principles.
Consumer protection must be paramount
Consumer protection has been the main post-financial crisis focus of EU regulation. The close link between consumer protection and solvency rules will be obvious to anyone in the industry. I would go so far as to say that lack of consumer understanding of financial products and risks was one of the causes of the financial crisis. Financial stability is linked to consumer confidence, so addressing consumer understanding, and therefore trust and confidence of financial markets is the key to improving financial stability.
Equivalence, not duplication
Developing EU-level regulation that improves trust and confidence must balance two important principles. First, it must create a level playing field across the financial markets. In this respect, the concept of equivalence applies: the intention is not to develop an approach that everybody must follow. Instead it is to respect differences in approaches among 27 member states. Equivalence does not mean duplication.
Some have worried that European institutions work to sweep away national rules in favour of a pan-European rulebook. In fact, the key to developing European-level financial regulation is to examine not the form but the substance of the national rules we are trying to converge. In the process we try to learn from each other the most efficient approach to regulating the industry. Rather than export national rules, it is about creating a level of regulatory certainty and efficiency in a world where more firms operate cross-border.
Better, future-proof regulation
The second important principle that applies to financial regulation is the need might not necessarily be like the last one, but we still have to learn the lessons.
Allied to this is the better regulation agenda, to which the work of member states including the UK have been very helpful. Practices such as impact assessments and regular stakeholder consultation are now commonplace. In fact, we now get complaints that we consult too much.
We have learned a great deal, and the more effective the public consultation, the more we will learn about the nuances of the responses, including the motivations behind them. We try to meet with stakeholders, through both public hearings which we find very effective, but also on an individual basis, not just the large firms but the small local players as well. We have learnt from these meetings that they are best held at the earliest possible stage of the policy development process in order to understand the various points of view, before negotiations begin. We try to separate the arguments from the motivations, and prioritise the issues with a view to creating the closest we can get to a universally beneficial solution.
Liaison with EIOPA
A vital component in the development of EU regulation is convergence in the post-regulation supervisory stage. In January 2011, the European Insurance & Occupational Pensions Authority (EIOPA) came into being, and this was a significant step from the committee of supervisors (CEIOPS) that it replaced. This supervisory architecture allows national supervisors to work together and learn best practices that overcome the procedural, cultural and traditional barriers that still exist. It includes peer reviews to help maintain good co-operation between the supervisors.
The major change with the advent of EIOPA is its authority status, and these changes have been reflected in its working relationship with us at the European Commission. Directorate-General Internal Market & Services is represented in EIOPA’s work, and we frequently consult with each other on supervisory and regulatory best practices.
Principles versus rules
Should European law be principle- or rule-based? Such debates about the amount of detail of EU-level regulations often arises in discussions be they at consultation or parliamentary committee stage, especially given that the dividing line between the technical and the political often gets very blurred. We had agreed that we wanted to have principle based legislation, and that Lamfalussy Level 2 would be delegated to the Commission while Level 3 would be dealt with by the supervisory authorities. However I certainly observe that people are starting to question that distinction.
Specific Insurance Initiatives
Insurance Guarantee Schemes
The White Paper on Insurance Guarantee Schemes was put out for consultation, and we have still not completely decided on the way forward. Do we need a Europe-wide system of insurance guarantee schemes? Fortunately in insurance we have had very few cases of insolvency. Should we now mount up a regulatory system? These issues are still outstanding and we intend to address them in due course.
Review of the Directive on Institutions for Occupational Retirement Provision
This is a subject of some debate and we recently ran a public hearing. The Commission does not want a one-size-fits-all approach. When you use the words ‘pension fund’ in the UK, please, when you talk about the German pension fund, consider that this is a different vehicle. The way they operate is different, and we need to take that into account. We also do not want to – as some people say – “copy and paste” Solvency II into pension funds. To the extent that pension funds are different from insurance companies you have to take account of that fact. It is probably not so much the institution but the products. The pension promise may be very different from an insurance contract. Therefore the solvency rules of the institution that is selling these products should, logically, be different. This is some of the logic that we have in mind.
There is much to discuss on Solvency II, and such a detailed discussion is not within the scope of this article.
However I will say that it is an important issue not just for Europe but the global insurance markets. We need a risk- based solvency regime in the interest of the insurance industry and its customers, and Solvency II is essential for European insurers, but should also provide a blueprint for a risk-based solvency regime for other regions as well. Such a regime allows insurance products to be better priced and if all economies in the world signed up to this approach, we would have achieved a level playing field.
Insurance Mediation Directive Review
There are no simple insurance products that I know of, which is why I think intermediaries have an important role to play. We are planning an amendment of the Insurance Mediation Directive to ensure the same rules to apply to everyone who sells insurance products: extending the scope of application from intermediaries to direct writers. We want to have more transparency, clarifying the relationship between the intermediary and the insurance company, and providing more disclosure about the intermediary’s remuneration.
Packaged Retail Investment Products
We want a specific regime for Packaged Retail Investment Products where we want to apply the MiFID rules. Facilitating cross-border business: we are trying to find some answers to all the discussions we have had over the years between home and host supervisors when people cross borders. The debate has spanned the following:
§ should all sales of insurance products be covered by the directive?
§ what kind of disclosures should there be concerning remuneration: direct disclosure or on request?
§ should MiFID rules apply to insurance PRIPs, and indeed some people say to all insurance products?