The 3nd Annual Conference of EIOPA took place on 20 November 2013 as part of the Euro Finance Week in Frankfurt. It provided more than 350 participants from insurance companies and pension funds, consumer representatives, professional associations, academia, supervisory authorities, European and international institutions with the opportunity to exchange views on the recent regulatory and supervisory developments in the (re)insurance and pensions sectors.
Throughout the conference, the speakers and the panellists of 3 panel sessions touched on topics such as future of life insurance and regulatory developments in the area of pensions and insurance.
The panel focused on current challenges and possible strategic directions for life insurers and institutions for occupational pensions provisions (IORPs).
Among the biggest challenges participants outlined protracted low interest rate environment affecting the financial industry. It was pointed out that in case the rates remain at the same exceptionally low level for the next 5 years, it might “lead to terrible turmoil on the life insurance market”. EIOPA indicated that low interest rates will be a key focus of the insurance stress tests that the Authority is going to conduct in 2014.
Participants also agreed that business strategies of life insurers and IORPs should take into account such trends as demographic changes; massive transfer of wealth from savers to public sector and banks as well as competition with the long-term investment products provided by the banking sector. “It is important to develop business models without creating dead obligations that will make companies insolvent”, indicated the panel.
Panellists concluded that in future life insurers and IORPs should focus on such biometric data as mortality, longevity, life expectancy rather than to just concentrate on savings products. Another strategic direction for companies should be the increase in transparency: pure trust without any explanations will not work anymore. Customer should receive clear and comprehensive information about his individual assets on a regular basis.
During the discussion a strong need for a pan-European pensions framework was noted. At the moment 6,6 millions of EU citizens work in other Member State than they come from, while further 1,2 million are living in one EU country and work in another one. However, the existing framework for occupational pensions is insufficient, it comprises only 84 cross-border pensions schemes.
The panel agreed that cross-border pension schemes should be kept simple and that the single European product is not supposed to be an exclusive offer, but should go along with other products. EIOPA emphasized that a European approach towards pensions is possible and the Authority will proceed in providing analysis and making further research necessary in this direction. The European Commission underlined that in its work on the IORP Directive review it will not seek for a “one-fits-all solution” for insurance and IORPs, but will take into account the specificities of the pensions business.
Participants welcomed the agreement on the Omnibus II and indicated that the agreement gives the necessary level playing field.
The purpose of this session was to highlight the future steps towards the implementation of Solvency II. It was announced that the European Commission plans to publish the Level 2 Delegated Acts in April 2014 and to formally adopt the document in August- beginning of September 2014. EIOPA indicated that it will publicly consult on the Level 3 technical standards and guidelines as soon as possible during 2014, in order to deliver them in time for a good and timely implementation by the market. Insurance companies and supervisory authorities will use the next 2 years in order to prepare in a consistent and convergent way for the new framework in accordance with EIOPA Guidelines on Preparing for Solvency II.
Participants outlined that one of the main issues during the further implementation process will be the discussion on the long-term investments. They agreed that there should be a balance between investments in the real economy and a prudent approach.
Proportionality was named as one of the essential principles of the Solvency II application: the panel noted that the new framework should not put an administrative burden and inappropriate costs on small insurance companies.
Panellists also expressed certainty that Solvency II will be beneficial for consumers as it will lead to a wider and more differentiated range of insurance products; improve risk management systems of companies and all in all will provide guidance on how to better treat consumers.
Welcome speech by Gabriel Bernardino, Chairman of EIOPA
Keynote speech by Thomas Steffen, State Secretary of the German Federal Ministry of Finance
Closing speech by Michel Barnier, European Commissioner for Internal Market and Services