Despite ongoing debates over Solvency II and some resistance, the changes planned for the EUs insurance and reinsurance regulatory structure will ultimately be accepted as important and necessary, says the chairman of the European Insurance and Occupational Pensions Authority (EIOPA).
Gabriel Bernardino was addressing a London insurance conference and said that key political decisions to be made on the European Union (EU) directive this year means that 2013 will be regarded as vital to the process. There were currently many challenges from both a European and UK perspective. He added that Solvency II could be in place in 2016.
Bernardino added that Solvency II has four goals: risk-based financial regulation; improved disclosure and transparency; appropriate governance; and enhanced supervision. Attaining these objectives would put the industry out of the comfort zone, he added. If it failed to do the right things, the consequences could be devastating for consumers and consumer protection
Tidjane Thiam, group chief executive officer (CEO) of life assurance group Prudential, also stressed the importance of getting Solvency II right and said that the industry stood ready to support making difficult decisions. “This is not some arcane esoteric insurance directive,” he added. “Getting this wrong will have real consequences.”
An effective Solvency II regime, Thiam said, would create jobs in a region of high unemployment, attract needed investment to Europe, encourage economic growth, and offer more financial security to ageing populations.
Nigel Wilson, group CEO of Legal & General, criticised the amount of money that has already been spent on Solvency II and described the UK’s risk-based capital approach to regulation as “the best in the world”.
Frankfurt-based EIOPA describes its main goals as protecting consumers, increasing public trust in the financial system and seeking a greater harmonization of rules within the EU. Bernadino stressed that consumer protection lies at the heart of Solvency II, and the aim of the directive was not to have more capital in the system, but to allocate capital to where the risks are. He also predicted that the goals of Solvency II will have been achieved by 2020.
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