Current developments in insurance supervision

Good morning, everyone,

It’s a true honour to be here with all of you in Bonn. This gathering is beginning to feel like an annual tradition for me as well, now that I'm here for the third time. I’d like to extend my heartfelt thanks to BaFin for organizing yet another great event.. Many thanks also to Julia Wiens, not only for inviting me to this conference, but also for joining EIOPA’s Board of Supervisors in January, and for her commitment to continuing our strong cooperation.

As we approach the end of the year, we reflect on a period marked by geopolitical tensions and economic challenges—felt here in Germany and across the globe. This year, we have also witnessed significant elections in Europe, the U.S., and other regions –a changing political landscape that calls for reflection from us all. New elections will be held also in Germany, next year in February. In Brussels, a new institutional cycle is beginning, which promises continuity on certain key topics – for instance, the green and digital agenda – but also new areas of focus, notably strengthening European competitiveness.

In these times of uncertainty, it’s reassuring to know that a strong supervisory framework is guiding our financial sector, providing the confidence that, even as circumstances shift, insurance undertakings are well-prepared to navigate what lies ahead. As indeed, the road forward will still have its challenges. Geopolitical and economic pressures are unlikely to ease very soon, and the nature of our work—whether as insurers managing societal risks or as supervisors overseeing these efforts—has become more complex. The risks we face today are increasingly interconnected, complex, and fast-evolving. As a result, our industry and the supervisory community must—and are—rethinking their approaches to adapt to this new reality. Only prioritizing an EU-wide perspective over a purely national one can help us move forward.

Today, I would like to share with you how EIOPA is working to support the insurance sector in delivering value to policyholders, businesses and the EU economy as a whole. I will also highlight areas where we see the need for further solutions and additional efforts in the future.

[Reflections on Solvency II]

The revised Solvency II framework will likely enter into force as of January 2025. We are now working on implementing the Level 1 review in the Level 2 regulations and further Level 3 measures. Overall, EIOPA welcomes the revisions to the framework. There are elements in the revised framework which certainly contributed to enhance it, and I can proudly say that many of these amendments reflect EIOPA’s recommendations.

Firstly, I am referring to the Insurance Recovery and Resolution Directive, which will improve how we prepare for and manage insurers in distress or at risk of failure. 

Second, the inclusion of macroprudential perspective in Solvency II, which will strengthen our ability to address systemic risks. 

Third, EIOPA received mandates on sustainable finance. In this respect, we have recently published our recommendations to the European Commission suggesting an additional capital charge for fossil fuel-related assets, to better align insurers’ capital requirements with their risk exposures. 

Further, EIOPA has strengthened the proportionality framework, so that requirements are better suited to the size, complexity, and risk profile of individual insurers. Following the feedback received, EIOPA is finalising its technical advice to the Commission, focusing on how proportionality applies to undertakings that are neither small nor non-complex. The final advice will be delivered at the end of January 2025.

Among the framework amendments we have often advised caution on is the review of the Pillar I measures, which are now expected to result in a significant reduction in capital requirements. The extent of this reduction will ultimately depend on the specific measures outlined in Level 2. Currently, solvency ratios exceed 200%. In two years, behind the same solvency ratio of 200%, there will be much less capital compared to what companies are holding today – less capital available for shocks at a time when geopolitical risks are tremendous, and macroeconomic risks are also still there. A very concerning development. Therefore, we will continue to closely monitor the markets, we will carefully look at risk management and we will require insurers to remain resilient and well-prepared to manage any potential shocks. We will also monitor how the released capital will be used to finance the green transition as it was promised.

Finally, I must note some missed opportunities, which could have significantly strengthened the Single Market, particularly in terms of consumer protection. One is the supervision of cross-border business, as well as of large insurers using internal models, and active in multiple Member States. The second one is the harmonisation of Insurance Guarantee Schemes (IGS). In Europe, insurers can operate with one license in 27 member states; however, consumers are protected in 27 different ways. In other words, we have created a single market for insurance, but not yet one for consumers. These are two priorities we will be advancing in the next cycle, and I will elaborate on them further.

[Insurance Capital Standards]

As we look ahead, allow me to also look broader, at the international perspective. Last week, the International Association of Insurance Supervisors (IAIS) announced the successful agreement on the final version of the global Insurance Capital Standard (ICS), which will set capital requirements for insurance groups active on a global scale. This is a landmark achievement, the result of years of negotiations, with Europe playing a central role. It demonstrates that, by and large, Solvency II has been recognised as the global reference framework.

The comparability assessment of the United States (US)-developed Aggregation Method (AM) has also been completed. While the current provisional US-AM does not provide comparable outcomes to the ICS, it lays the foundation for ICS implementation, pending further work in key areas like the treatment of interest rate risk and appropriate timing of supervisory intervention.

While I acknowledge the pressure industry has faced with data reporting, the evidence we gathered was essential to reaching this conclusion. I am grateful to all companies that participated in this data collection effort, with the German market playing an important role Looking ahead, no major milestones or additional data collection are planned for next year. As of 2026, jurisdictions will carry out a self-assessment. The following year, in 2027, a set of targeted jurisdictions will undergo in-depth assessments of their ICS implementation. Also for the final US-AM, the implementation assessment will be subject to the same approach, methodology and timetable as the ICS implementation assessments of other jurisdictions, whilst also focusing on the AM specificities. 

As you can see, the adoption of the ICS is just one, yet crucial, step in a long-term project. Nevertheless, I am now more confident that, despite our national differences, we can find common ground when working towards a shared objective. In this case, the goal was to strengthen global insurance supervision by promoting greater convergence in group capital standards, ultimately ensuring the resilience of the insurance sector.

[Protection gaps: NatCat]

There are other areas where finding common ground and solutions is absolutely necessary. One of those, on top of EIOPA’s agenda, is addressing the insurance protection gap, especially for natural catastrophes. 

We have all witnessed the devastating extreme weather events in Spain a few weeks ago. First and foremost, I want to express my deepest condolences to anyone here who may have lost a loved one or friend in this tragedy. It was an immense loss, with many lives taken. Secondly, I urge insurers, policymakers, local governments, and citizens across Europe to take proactive steps. The events in Spain highlight how 'shared resilient solutions' are important. Not only to pay for damages ex post, but to actually mitigate damages ex ante, both in terms of human lives and property.

Scientific studies are very clear. Europe is the continent that is warming up fastest. Only last year, Europe faced severe heatwaves, resulting in over 47,000 heat-related deaths between June and September. Southern Europe – particularly Greece, Bulgaria, and Italy – recorded the highest mortality rates. Destructive natural catastrophes related to climate change are happening more frequently and with more intensity in Europe. Besides the flash floods experienced in the region of Valencia a few weeks ago, many other European countries – especially in Central Europe, including Germany, Austria, Hungary, Slovenia, and the Czech Republic – experienced severe floods, causing significant damage and disruptions. 

We are past the point where this can be seen as an issue affecting only a few countries in Europe—it's happening everywhere. And it’s intensifying every year. Nearly 20% of Europe's direct NatCat economic losses over the past fifty years have occurred in just the last three years alone. The time to act is now, and we must act together.

Addressing the NatCat protection gap is a collective exercise, that takes – in different stages – the effort of everyone. First of all, I could not stress enough what central and indispensable role insurers play here: by promoting climate mitigation and adaptation measures, but also through their investments and underwriting practices. When it comes to risks which may become uninsurable, we need to explore shared resilience solutions involving public-private partnerships. Finally, we need to raise consumers’ awareness of the risk exposure and create standards for simple and comparable products to increase insurance uptake across the EU. 

[Value for money]

And this brings me to another important point: a key part of addressing protection gaps and ensuring a strong insurance sector for the future is consumer trust. Currently, in Germany, consumer trust in insurance providers stands at just 46%. A key factor behind this is the perceived value for money that products offer. According to preliminary figures from this year's Eurobarometer survey, only 41% of German consumers believe their insurance-based investment products (IBIPs) offer value for money. This figure drops further to 31% among low-income consumers. Overall, 14% of German consumers have refrained from purchasing or renewing an IBIP due to high costs and fees.

So, there is room for improvement here, and there are some things insurers can do. In this regard, I deeply appreciate the work my supervisory colleagues are doing across Europe, including BaFin. I would especially like to thank Julia Wiens and her team for their efforts in strengthening conduct supervision in Germany. In one of her recent statements, she highlighted the importance of ensuring that products provide value for money by being designed and distributed in a way that meets consumers' needs and expectations—sentiments I wholeheartedly agree with. I therefore encourage taking any necessary measures to address value-for-money risks in the German insurance market. 

[Savings and Investments Union]

Consumers’ trust in financial products is an essential condition for strengthening national capital markets and, by extension, building a Savings and Investments Union at European level. Another essential element is ensuring consistent consumer protection across Europe and throughout the entire financial sector – currently, a goal that has not yet been fully achieved. For example, while Germany has Insurance Guarantee Schemes—Protektor Lebensversicherungs-AG for life insurance and Medicator for health insurance—these protections only apply to policies underwritten by German insurers or branches. If a German consumer purchases a policy from an insurer outside Germany, these schemes will not provide coverage. This is not what we can consider a true Single Market for consumers.

If we want consumers, in Germany and around Europe, to move their savings from bank accounts to more productive investments, including insurance products, we need to reflect on the following: whether products offer value for money, whether consumers are equally protected across Europe, whether we have mechanisms at EU level to address cross-border supervisory concerns that cannot be addressed at national level. Regarding the latter, I firmly believe that EIOPA, through its Board of Supervisors, must have the ability to intervene in cross-border cases that remain unresolved due to inaction by a national supervisor. To intervene effectively in such situations, which, while not frequent, do arise, EIOPA should be equipped with the same powers as a national supervisory authority, to be used as a last resort and following the agreement of the Board of Supervisors.

While achieving this in the next political cycle may present challenges, I remain hopeful that we can make significant progress. Member States have traditionally been cautious about shifting responsibilities to the EU level, even when it benefits to consumers. Throughout my time in this role, I have encountered this hesitation on various issues—whether it’s centralized insurance supervision, the Capital Markets Union, or the Retail Investment Strategy. However, to build a strong and competitive insurance sector on the global stage, we must think boldly, and collectively as Europeans. We would not have created the euro without giving up our national currencies. 

[Priorities going forward]

Looking ahead, I find myself reflecting on the following question: how can we ensure that supervision supports growth in a world still grappling with significant challenges and risks?

As I mentioned earlier, strengthening European competitiveness has become a central political priority for Europe. While remaining true to our mandate, at EIOPA we will contribute to this objective wherever possible. We need to strike a balance between reducing regulatory burden – as we have done in the past – and ensuring we have the necessary data to monitor and address risks, especially emerging ones. This balance can be achieved by avoiding unnecessary duplication of reporting, ensuring proper sequence of legislation, and enabling efficient implementation. 

When faced with such fundamental questions, I often return to the core principles. Insurance supervision exists to ensure financial stability and protect consumers. In this regard, I believe our priorities remain on the right track. Our efforts should focus on ensuring the industry holds enough capital to meet its obligations, that products genuinely address consumers' needs by offering value for money, and that insurers are well-equipped to withstand and respond to cyberattacks and climate risks—two of the most pressing challenges society will face in the years ahead. In fact, a good part of our supervisory work next year will be dedicated to implementing the Digital Operational Resilience Act (DORA), which is critical to enhancing the industry's resilience in the digital age. 

To conclude, creating a true Single Market for insurance—ensuring a level playing field for consumers and businesses both within Europe and globally—is, in my view, the key element of supervision that enables growth rather than hindering it. 

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Ladies and gentlemen, 

Thank you for your undivided attention.