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Reviewing EU insurance rules: Encouraging insurers to invest in Europe's future

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The European Commission has adopted a comprehensive review of EU insurance rules (known as Solvency II) so that insurance companies can scale up long-term investment in Europe's recovery from the COVID-19 pandemic.

Today's review also aims to make the insurance and reinsurance (i.e. insurance for insurance companies) sector more resilient so that it can weather future crises and better protect policyholders. Moreover, simplified and more proportionate rules will be introduced for certain smaller insurance companies.

Insurance policies are essential for many Europeans and for Europe's businesses. They protect people from financial loss in the case of unforeseen events. Insurance companies also play an important role in our economy by channelling savings into financial markets and the real economy, thereby providing European businesses with long-term financing.

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Today's review consists of the following elements:

  • A legislative proposal to amend the Solvency II Directive (Directive 2009/138/EC);
  • a Communication on the review of the Solvency II Directive, and;
  • a legislative proposal for a new Insurance Recovery and Resolution Directive.

Comprehensive review of Solvency II

The aim of today's review is to strengthen European insurers' contribution to the financing of the recovery, progressing on the Capital Markets Union and the channelling of funds towards the European Green Deal. In the short term, capital of up to an estimated €90 billion could be released in the EU. This significant release of capital will help (re)insurers ramp up their contribution as private investors to Europe's recovery from COVID-19.

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The amendments to the Solvency II Directive will be supplemented by Delegated Acts at a later stage. Today's Communication sets out the Commission's intentions in this regard. 

Some key points from today's package:

  • Today's changes will better protect consumers and ensure that insurance companies remain solid, including in difficult economic times;
  • consumers (“policyholders”) will be better informed about the financial situation of their insurer;
  • consumers will be better protected when buying insurance products in other Member States thanks to improved cooperation between supervisors;
  • insurers will be incentivized to invest more in long-term capital for the economy;
  • insurers' financial strength will take better account of certain risks, including those related to climate, and be less sensitive to short-term market fluctuations, and;
  • the whole sector will be better scrutinised to avoid that its stability is put at risk.

Proposed Insurance Recovery and Resolution Directive

The aim of the Insurance Recovery and Resolution Directive is to ensure that insurers and relevant authorities in the EU are better prepared in cases of significant financial distress.

It will introduce a new orderly resolution process, which will better protect policyholders, as well as the real economy, the financial system and ultimately taxpayers. National authorities will be better equipped in the event of an insurance company becoming insolvent.

Through the establishment of resolution colleges, relevant supervisors and resolution authorities will be able to take coordinated, timely and decisive action to tackle problems arising within cross-border (re)insurance groups, ensuring the best possible outcome for policyholders and the broader economy.

Today's proposals build extensively on technical advice provided by EIOPA (the European Insurance and Occupational Pensions Authority). They are also aligned with the work that has been carried out at international level on the topic, while taking into account European specificities.

An Economy that Works for People Executive Vice President Valdis Dombrovskis said: "Europe needs a strong and vibrant insurance sector to invest in our economy and to help us manage the risks that we face. The insurance sector can contribute to the Green Deal and the Capital Markets Union, thanks to its dual role of protector and investor. Today's proposals ensure that our rules remain fit for purpose, by making them more proportionate.”

Mairead McGuinness, the commissioner responsible for financial services, financial stability and Capital Markets Union, said: “Today's proposal will help the insurance sector step up and play its full part in the EU economy. We are enabling investment in the recovery and beyond. And we're fostering the participation of insurance companies in the EU's capital markets, providing the long-term investment that is so vital for a sustainable future. Our growing Capital Markets Union is essential for our green and digital future. We're also paying close attention to the consumer perspective; policyholders can be reassured that they will be better protected in future if their insurer runs into difficulties.”

Next steps

The legislative package will now be discussed by the European Parliament and Council.

Background

Insurance protection is essential for many households, businesses and financial market participants. The insurance sector also offers solutions for retirement income and helps channel savings into financial markets and the real economy.

On 1 January 2016, the Solvency II Directive entered into force. The Commission monitored the application of the Directive and consulted extensively with stakeholders on possible areas for review.

On 11 February 2019, the Commission formally requested technical advice from EIOPA to prepare for the review of the Solvency II Directive. EIOPA's technical advice was published on 17 December 2020.

Beyond the minimum scope of review mentioned in the Directive itself, and after consulting stakeholders, the Commission identified further areas of the Solvency II framework that should be reviewed, such as the contribution of the sector to the European Union's political priorities (e.g. the European Green Deal and the Capital Markets Union), the supervision of cross-border insurance activities and the enhancement of the proportionality of prudential rules, including reporting.

More information

Legislative proposal for amendments to Directive 2009/138/EC (Solvency II Directive)

Legislative proposal for the recovery and resolution of (re)insurance undertakings

Communication on the review of the Solvency II Directive

Question and answers

European Commission

EU Cohesion policy: First Gender Equality Report maps female achievements and disadvantages in EU regions

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The Commission has published the first Regional Gender Equality Monitor of the EU. It provides an accurate picture of where women achieve the most at regional level in Europe, and where they face the largest disadvantages. Cohesion and Reform Commissioner Elisa Ferreira (pictured) said: “I am delighted to bring forward this ground-breaking work on mapping the glass ceiling that women face at regional level in Europe. The report demonstrates that there is still a lot to do to help women achieve the same opportunities as men. The Commission will continue working hard towards a gender-equal Europe.”

The paper is based on two specially developed indices: the ‘Female Achievement Index' and the ‘Female Disadvantage Index'. They reveal both the regions where women are achieving more and where they are at a disadvantage compared to men. The paper shows that, on average, women in more developed regions are able to achieve more and are at less of a disadvantage, while most women in less developed regions face big challenges. Within countries, women in capital regions tend to achieve more and are at less of a disadvantage. In general, regions with a lower female achievement index have a lower gross domestic product per capita, while regions with a higher level of female achievement have a higher level of human development. Finally, the quality of government is higher in regions where women achieve more.

In addition to the working paper, the underlying data and the interactive tools, results are also available in the INTERACTIVE DATA STORY.

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European Commission

High Representative/Vice President Borrell travels to Washington

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High Representative/Vice President Josep Borrell (pictured) will be in Washington DC to 15 October. He will hold a number of high-level meetings focused on the relationship between the European Union and the United States of America, on advancing the transatlantic agenda and on pressing international developments. This will be the first official visit by High Representative Borrell to Washington since the new US administration took up office. On Thursday, 14 October, High Representative Borrell will meet with the US Secretary of State Antony Blinken to discuss current foreign policy issues and initiatives to deepen further the EU-US strategic partnership and advance an already close cooperation on foreign and security policy. He will also hold a meeting with the US Deputy Secretary of Defence Kathleen Hicks to discuss how to pursue enhanced bilateral co-operation in the field of security and defence. More information is available here.

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European Commission

Commission participation in the Annual Meetings of World Bank Group and International Monetary Fund

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Several members of the Commission will participate in the Annual Meetings of the World Bank Group (WBG) and the International Monetary Fund (IMF) taking place this week in Washington DC, United States of America. The meetings will bring together central bankers, ministers of finance and development, private sector representatives, civil society, and academics to discuss issues of global concern, including the world economic outlook, global financial stability, poverty eradication, jobs and growth, economic development, and aid effectiveness.

Economy Commissioner Paolo Gentiloni will attend the meeting of G20 finance ministers and central bank governors and the G7 ministerial meeting. Executive Vice President Valdis Dombrovskis will participate virtually in the plenary session of the International Monetary and Financial Committee. A written statement will be contributed by Jutta Urpilainen, Commissioner for International Partnerships, to the plenary session of the Development Committee Meeting.

This meeting will revolve around two topics: ‘WBG Financing for Green, Resilient and Inclusive Development (GRID) – Towards A Post Pandemic Approach' as well as ‘Prevention, Preparedness, and Response: The WBG's Role in Future Crises'. Commissioner Gentiloni will also appear at an event organised by the Brookings Institution and will hold an exchange of views with the US Chamber of Commerce on the economic outlook and current policy priorities on Thursday, 14 October.

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