Statement to the Economic and Monetary Affairs Committee of the European Parliament - October 2023

Statement to the Economic and Monetary Affairs Committee of the European Parliament

Petra Hielkema, Chairperson of EIOPA

Brussels, 23 October 2023

CHECK AGAINST DELIVERY

 

Thank you for this opportunity to share with you some highlights of EIOPA’s work.

Again we meet during a time of turmoil. Aside from geopolitical events, inflation continues to cast a shadow.

Indeed, in the past year, inflation has affected insurers' capital levels, profitability, and liquidity, with consequences for consumers and the cost of living. EIOPA’s recent report examined the impact of higher-than-expected inflation and interest rates on the insurance sector, assessing future risks and vulnerabilities.

In the face of today’s challenging environment, however, both the insurance and pensions sectors remain robust, playing a vital role in Europe’s economy.

And while inflation has been an additional consideration in EIOPA’s work, the focus has remained on the priorities set out in our strategy one year ago.  I will highlight two today: closing protection gaps and cross-border supervision.

In the insurance sector, total assets amount to around EUR 9.5 trillion, positioning Europe as one of the largest insurance markets globally.

Yet while it is clear that Europe has a considerable insurance market, it is also clear that there is not enough insurance coverage, and protection gaps persist too many areas, especially when it comes to addressing natural catastrophes.

This is important because we are seeing more frequent and more devasting natural catastrophes affecting our continent than ever before. Unfortunately, I am sure many of you and the constituents you represent will have been affected by fire, flooding, heat or rain in the recent past.

Through our work, we have taken steps to help measure and close these protection gaps by developing tools like the natural catastrophe dashboard and promoting climate-related adaptation measures in non-life underwriting practices.

Closing these gaps requires a collective effort from us all. Every player in the ecosystem – consumer, insurer, capital markets and public authorities – has a role to play, not only in their own capacity, but also by strengthening the capacity of other players. Without this joint approach, we will not succeed.

EIOPA is also looking at the cyber insurance protection gap – and I highlight this because October is European Cybersecurity month. Our research tells us that close to 70% of SMEs are not covered for the risk of cyber attacks. This is figure is too large.

Finally, the pensions savings gap.

In 2022, more that 36 million people in Europe were contributing to a workplace pension and more than 11 million people were in receipt of one.

But still too many people will not have a sufficient income when they retire, with women particularly at risk.

So we must continue to ask ourselves how we can close pension gaps.

One answer is data. The good thing is that a lot of data already exists. The challenge is bringing it together. This is why we need pension dashboards – to provide accessible data in one place. Such overviews do not exist at EU and national levels and I encourage you and the other EU institutions to take steps to come to one dashboard. Only with a full overview we can locate and measure the gap and close it.

EIOPA also recommends the development of pension tracking systems to provide information to consumers to help them make better decisions about their long-term savings.

Indeed, better options for long-term savings are also fundamental to closing the pensions gap. Consumers need savings options that are accessible, simple, offer value for money and are above all safe. For this reason, we welcome the Retail Investment Strategy as a means to strengthen the Capital Markets Union from the bottom up.

How else can we encourage saving? Through the digital transformation, we are seeing opportunities for both product manufacturers and consumers, including through cross-border business resulting from passporting.

But we see a growing need to adapt supervision to this new digital, cross-border landscape.

Issues often arise when home supervision and coordination with host supervision are inadequate, particularly in cases involving complex life products and niche markets. In these cases, EIOPA uses the powers that it has to address cases but too often the outcome is too little too late. 

Hence we need to strengthen cross-border supervision as it is becoming increasingly clear that to deal with these issues effectively and to prevent consumer harm, EIOPA should be in a stronger position to intervene and prevent the detriment from continuing.

Let me touch briefly on two of EIOPA’s other priorities. Both sustainable finance and digitalisation remain high on our agenda, as they continue to have a profound impact on both the insurance and pensions sectors. In both cases, our focus is on supporting the sectors to adapt, to seize the opportunities that arise, while ensuring that policyholders and beneficiaries remain protected.

A robust regulatory framework is vital to underpin the effectiveness and stability of both sectors. Here, EIOPA has had a number of regulatory initiatives on its radar. This includes the review of the IORP II Directive for occupational pensions, where our goal has been to embrace the future while protecting the legacy.

When it comes to the growing amount of horizontal regulation that we are seeing, our approach is to ensure that the specificities of the sectors we supervise are taken into account early in legislative processes.

A good regulatory framework, coupled with effective supervision also fosters competitiveness. If we compare ourselves with markets outside of Europe, we should always keep in mind the importance of policyholder protection. Europe’s insurance sector is well-positioned to compete globally, thanks to risk-based supervision and a regulatory approach that fosters trust and resilience, exemplified by Solvency II.

Before I close, I would like to underline that we at EIOPA  value the good cooperation we have with you.

I know that next year will bring changes – both at the Parliament and at the Commission. I want to assure you that at EIOPA we stand ready to support the members of the new ECON committee, the Parliament and the new Commission, in tackling the challenges and opportunities that that we face together.

Thank you. I am ready now to take any questions.