Keeping our interests aligned in a changing and challenging environment

Dear ladies and gentlemen,

It’s a pleasure to be here with you today for AMICE’s 9^th Congress in the beautifully vibrant city of Bilbao. The world of insurance is diverse, ranging from specialized primary insurers and reinsurers all the way to captives. A good regulatory and supervisory authority, which we strive to be, has to have an ear out for every reasoned voice within the sector. I’m glad to be here today to hear your perspective, the perspective of mutuals and cooperatives, and discuss how we can best develop the future of Europe’s diverse insurance market in the right direction.

Ladies and gentlemen. I was invited to share my views on how regulators, policymakers and financial institutions can come together to tackle the challenges we face. The fact that ‘polycrisis’ became somewhat of a buzzword for the past few years goes to show that of challenges, sadly, we have many.

We are witnessing prolonged war in Europe, resurgent conflicts in the middle East and a tense geopolitical situation across the world that brings back bad memories of a time we thought we’d left behind. We are on the verge of possible turning points not only in the global order – with many elections coming up, including the European elections that start this week – but also in the technologies we use and the environment we inhabit.

Regarding technology, we have over the past few decades gone from a well-developed, but still fairly analog world into an increasingly digital one and we are entering a new phase of even higher digitalization. Above all when combined with automation and artificial intelligence, our dependence on digital solutions and infrastructure carries significant security consequences and poses difficult ethical questions.

On climate, we must move heaven and earth to achieve the goal of a 1.5 degrees Celsius threshold. Already now, natural disasters are ravaging lands, livelihoods and lives. In 2023 alone, natural catastrophes resulted in 280 billion USD of losses and close to 100 000 fatalities. Without decisive action, this will only get worse… and not predictably worse: chaotically so.

To all these challenges, there is a societal element as well – including displacement from war zones, mis- and disinformation in a digital world with few gatekeepers and the loss of everyday security due to unstable weather patterns.

It is within this uncertain and challenging environment that we operate. However, when I put on my insurance hat, there are at least three positive aspects I see.

The first is that insurers can do a lot to mitigate some of these challenges through impactful sustainability initiatives and by implementing digital solutions that are safe, deliver good results to consumers and uphold the highest ethical standards.

The second is the knowledge that policymakers, supervisors and industry participants all share the same overarching interests. We want a sector that’s relevant. We want a sector that’s stable. We want a sector that keeps pace with developments, and we want a sector that people can trust. True, we might disagree on some details, but our core interests are aligned. And that gives me hope for what we can achieve together in the future.

The third element is the power of insurance itself. If we could foresee every gust of wind, every rainfall, every accident, every theft and every disease, insurance markets wouldn’t exist – at least not as we know them today. But the world is an uncertain place. Fate deals different cards to different people and businesses. However, insurers aren’t holding just a few individual cards – they are holding an entire deck of cards. In other words, they can pool the risks of many individual clients, making many share the burden, making all have peace of mind, being in it together. In the ever more uncertain world that’s ahead of us, insurers will therefore gain even more relevance.

This all means that we’ve got tasks to accomplish, we’ve got common goals to reach and we’ve got households and companies counting on our services.

Turning to EIOPA’s role, our work naturally begins with setting up – and maintaining – a regulatory framework that ensures the stability of Europe’s insurance sector. Throughout hardships like the pandemic, high inflation and a battery of rapid interest rate hikes, Solvency II has proven its worth.

Despite these difficult times, it has continued to ensure that European insurers can provide vital services to businesses inside the Union while protecting consumers. In our recent review of the regulation, therefore, we didn’t go for an overhaul.

Instead, we carefully analyzed where the framework could be further improved and considered what new features we’d need to complement what we already had. Better integrated sustainability considerations, stronger liquidity management and broader macroprudential analysis were among the topics where we thought we needed to do more of. I’m glad that the political agreement on the file included these important points. I am also glad that the agreement focused very much on proportionality, ensuring a better fit of the framework to smaller, lower risk entities.  On a related note, it’s also positive that the first steps have been taken towards setting up a more harmonized system for winding down failing insurers in the EU following the adoption of the Insurance Recovery and Resolution Directive.

Besides Solvency II and IRRD , a host of other pieces of regulation, perhaps not specific to insurers but definitely impacting them, has been introduced. These include the AI Act, FIDA and DORA on digitalization or SFDR, CSRD and the Due Diligence Directive on sustainability – even though the financial sector, at least temporarily, did receive a carve-out from the latter.

The legislative agenda has been undoubtedly busy in the past few years. Understandably and justifiably, but still very busy. This regulatory push has brought us to a place where we can be confident about the scope and quality of the rules on paper, but where the focus will have to shift to implementation and enforcement. Therefore, for the next commission, I see the need for  the EU regulatory agenda to remain ambitious while at the same time taking good consideration of the necessary time needed for implementation and enforcement of what is already there.

We are on a good path when it comes to the regulation of financial institutions and services in the Union. But not everything is perfect yet – we need for instance to examine whether and where we could make regulatory reporting smarter and more efficient. We also need to comb through existing legislation and consider where proportionality measures could be enhanced. And as I said before, we need to implement and put rules into practice, where possible in a convergent way.

In other words, regulation is in such a shape that our focus is now more than ever on supervision.

Supervision is key to ensuring that the rules we make are being followed. Supervisory work is what anchors legislative texts in the real world. National supervisors are on the front line of supervision while EIOPA coordinates supervisory actions to make sure that responses across the EU are structured and consistent.

Our strategic supervisory priorities for the next three years recognize the dynamic environment we’re experiencing. Amid such disruptive changes, it’s imperative that we keep monitoring the financial robustness of undertakings – from provisioning and risk management to capital positions. At the same time, we must safeguard consumers’ interests throughout the digital and sustainable transition.

Within the twin priorities of financial robustness and consumer protection, we’ve chosen to focus on three distinct topics to be considered by the next commission.

No 1: We are looking at how insurers and pension funds can play a role in closing the insurance and pension protection gap.

No 2: We are further building on our role as a data hub in the EU for the insurance and pension sector as well as the institution responsible for enhancing convergence and action in case of cross border disputes between NCA’s.

No 3: We are examining whether insurance products, be it life or non-life, offer fair value for money to consumers.

Let me focus on this last point a little more, not least of all because new winds are filling the sails of the EU’s Capital Markets Union project. In our opinion, consumer-centric financial products will be central to making the CMU a success.

As I mentioned earlier, we are confronted with the double challenge of successfully orchestrating the green and digital transition of our economies. This transition requires new rules, new ways of thinking and new commitments. Clearly, it also requires significant investment. The European Commission puts the additional financing needs of the European Green Deal at €520 billion per year. On top of this, an estimated €125 billion will be needed every year until 2030 for the continent’s digital upgrade.

With state coffers under strain and subject to renewed budgetary limits, it’s not surprising that policymakers are looking at ways to mobilize European citizens’ massive savings to help fuel these transitions.

If done well, the mobilization of this vast private cash pile can be a win-win for all. European citizens collectively hold around 33 trillion euros in savings – more than twice the annual economic output of the entire bloc. However, as much as 40% of this sum is held – some would say idly – in cash and bank deposits.

Unfreezing some of this money and funneling it into financial products would provide much-needed financing on the one hand – and potentially generate higher returns on citizens’ savings than mere bank deposits.

The insurance sector plays a pivotal role here. First, because over 70% of the distribution of these products is done through insurance brokers and intermediairies. And second because insurers already invest a large part of the capital they hold in the European economy.

From a pension perspective more savings, be it in the second or third pillar – we support an automatic enrolment into occupational pensions – would also be very beneficial to the EU. Not only because this capital could be invested in the European economy, but also because it will help the current pension gap  in the EU.

We all know that there are many hurdles to overcome before a true CMU can be reached, including the fragmentation of capital markets and divergent tax practices across member states. This will require smart thinking and good dialogue with our industry. For example, the current ideas on securitization lack, in my opinion, the view from the insurance industry and therefore the current proposals risk to result in actions that will  not lead to desired results.

Another sizeable obstacle that I’m convinced we need to put more emphasis on is European savers’ widespread reluctance to engage with financial products.

Europe’s financial structure has traditionally been dominated by banks and bank-based funding. To tap the potential of capital markets, we don’t only need more harmonization and consolidation in markets. We need to effect a behavioral change in how people use their savings. And this behavioral change won’t come to pass if savers don’t trust the products and companies that offer them an entry into financial markets. Here mutuals, that by nature stand close to consumers, can play an important role.

This is why we’re putting so much emphasis on value for money at EIOPA.

Value for money means that consumer needs should be taken into account throughout the entire product life cycle, from design to distribution. It means that the costs and charges associated with the financial product should be clearly identifiable, reasonable and proportionate to the benefits offered.

We recently organized a consultation on the data, indicators and clustering approaches that may be used for setting value-for-money benchmarks. We have seen a number of products over the years especially in the unit-linked and hybrid market that demonstrably offered European consumers poor value for money – often with considerable mismatches between expected returns and the actual benefits received.

Proactively identifying and pulling such products from the market is essential to earning consumers’ trust. We received a good number of responses to the consultation – and would like to thank all those who shared their views – including AMICE. We are assessing how these new perspectives can enrich our proposal.

Value for money benchmarks will be an important part of the supervisory toolkit in the future. If well-designed, they will enable supervisors to better spot and scrutinize outliners in their markets without de facto forcing price caps and product uniformity on insurance manufacturers. We are very pleased to see that some national authorities are already actively probing and taking measures against suspicious products.

While mentioning national measures, let me underline that it is important to have an EU-wide approach to value for money benchmarks. An EU-wide approach means 1 project instead of 27 projects that than need to be harmonized, thereby making benchmarks a lot more expensive. An EU-wide approach means clarity and level playing field and avoiding an extra compliance burden due to diverging national approaches. An EU wide approach will mean that consumers across the bloc  have access to similarly good outcomes. Our cluster-led approach could leave room for national specificities here by only making comparisons between truly comparable products. If a distinctive product is only marketed in one member state, the benchmark would be made and recognized EU-wide but essentially be national. For all other products, the necessary flexibility would be retained.

Only by making sure that products offer fair value will we be able to earn consumers’ trust and encourage them to actively use financial products – to their own benefit and the benefit of all.

Some of the products available on the market have a high complexity, including pension products. We are of the view that EU citizens should have access to simple and straightforward pension products to save for retirement, regardless of where they may live and work.

Dear ladies and gentlemen. I was invited to speak about how we as regulators, supervisors and co-legislators can work better together with the insurance industry to forge a stronger sector.

Nothing comes easier to me than that, for I strongly believe that EIOPA does not act in isolation from practitioners in our sector. We listen, we engage and we provide ample opportunities for feedback and exchanges of views as we are preparing our advice, but also once they’ve been implemented.

I also take comfort in knowing that while we may have our differences, we have a common vision where it truly matters. We all want a thriving sector, one that’s stable, resilient and relevant. A sector that citizens from Bilbao to Stockholm, from Athens to Zagreb, will be able to trust with their life savings.

If we can further strengthen our sector, citizens’ trust will be the catalyst that drives its success. We can only earn that by providing them with good outcomes.

Ladies and gentlemen, thank you for your attention. I very much look forward to hearing your questions and to what the rest of the day has in store for us.