Statement to the Economic and Monetary Affairs Committee of the European Parliament - October 2024

Madam Chair, 

Honourable Members of the Economic and Monetary Affairs (ECON) Committee,

First of all, let me congratulate you on your election. Thank you for inviting me to share an overview of the European Insurance and Occupational Pensions Authority’s (EIOPA) achievements and our priorities for the coming years. I look forward to continued collaboration with ECON Members to ensure resilient and sustainable insurance and pension funds sectors.

Let me start by giving you an idea of the size and relevance of our sectors. Currently, insurers alone manage EUR 9.5 trillion in assets, of which around 70% is invested in the EU. In addition, pension funds manage 2.7 trillion serving 71 million members. These sectors not only provide financial security and peace of mind for individuals, but also enable the broader economy to flourish. But what should policy-makers pay attention to, to ensure insurance and pensions deliver on this essential role? 

Let me start with our top priority the climate protection gap. In the last decade, we have seen a serious increase of losses due to nat cat risk, floods, drought, fire and earthquake. And only around one-quarter of these losses were insured. We need better data collection and sharing to address emerging risks. We should raise consumers’ awareness regarding their risk exposure and create standards for simple and comparable products to increase insurance uptake across the EU. Shared resilience solutions involving public-private partnerships would help to adapt, to mitigate and to manage risks. We should all do our part to address climate risks impacting our society. And we should not only do this for climate risk, but also for cyber and health risk. 

Now, let me move to another priority: the pensions gap. With an ageing population and a shrinking labor force, we need to rethink how we organise a good life in retirement for all EU citizens and we need to do so holistically. Learning from succesful pension systems, we know that a holistic view across the three pillars of pensions is essential: state pensions (Pillar 1), occupational pensions (Pillar 2), and personal pensions (Pillar 3). We need to provide that overview via the development of pensions dashboards and pensions tracking systems. Beyond improving transparency and awareness, we also need to increase occupational pensions coverage, notably through auto-enrollment schemes, incentivising uptake of personal pensions products by facilitating decision-making, promoting financial literacy and offering simple products that offer value for money. Here we would welcom a reform of the Pan-European Personal Pension Product (PEPP) and stand ready to work with you on the IORPII Review. 

And if we do this well, we not only reduce the pension gap, but we also stimulate retail investments in capital markets, one of the key aims of the CMU. In order to get this right, we need to be mindful that when we talk about insurers and pension funds investing more in the economy, we actually talk about pensioners’ money being invested, we are talking about the retirement income of individual Europeans. Therefore, strengthening consumer protection and product transparency to ensure value for money is essential and here more needs to be done. EIOPA is committed to provide technical expertise on these and others issues, including in view of the Retail Investment Strategy (RIS) negotiations. 

Consumer trust is necessary and this can be built through appropriate product design and governance as well as sound, risk-based and proportionate supervision in the EU. As insurers are allowed to operate with a single license throughout the EU, and consumers can also buy across borders, we need to recognize that the level of protection consumers enjoy depends on where they buy the product. As insurance guarantee schemes (IGS) are not harmonised across Member States and the competence for insurance supervision is national. 

In simple words: if we want consumers to move there savings for retirement from bank accounts that are protected by a deposite guarantee scheme and supervised by a European supervisor to insurance products to generate a return and finance the transisiton, we need to ensure that the protection is equal, via an IGS and better supervision at the EU level.

Let me now move to the last two key areas I wish to discuss with you today, digitalisation and sustainability. Digitalisation presents both opportunities and challenges for insurance and pensions. Insurers benfit from higher amount of data and increasingly use artificial intelligence (AI), and EIOPA is exploring Supervisory Technology (SupTech) to improve oversight. However, we should be mindful of cyber risks. Also, more granular data on risks could threaten the core principle of risk mutualisation, affecting pricing and access to insurance and, hence, financial inclusion. EIOPA is working to mitigate these risks and ensure that insurance remains available and affordable for all.

A final word on sustainability. We have made significant progress on integrating sustainability into the financial sector regulatory framework. EIOPA is notably working on the implementation of the revised Solvency II Directive, including on the prudential treatment of sustainability risks and transition plans. Going forward, we must continue integrating sustainability into the prudential and conduct frameworks, monitor greenwashing, and helping the sector and consumers mitigate climate risks.

Let me now conclude. As we enter a new EU institutional and legislative cycle, it is essential to address the challenges before us and lay the groundwork for more resilient, sustainable, and consumer-centred insurance and pensions sectors, thereby supporting the CMU. As you have heard, the challenges very much all have an EU dimension and therefore need an EU approach. I wish you a good start with the work that needs to be done and EIOPA remains committed to supporting this Committee with the technical expertise needed to advance ECON legislative work.

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