On March 4, EIOPA published an opinion warning that some insurers' solvency levels could be at risk if current rates persist. It requested that national supervisory authorities provide details of how they are responding to the issue. In response, national authorities argue that the unique features of their domestic markets necessitate a tailored approach for each country.
A spokesperson for German financial regulator, BaFin, says: "The individual characteristics of the markets and the products offered nationally have to be adequately considered within the actions that are going to be taken [against the impact of low interest rates]".
Insurance industry trade bodies also doubt the benefits of collective action. Ellen Bramness Arvidsson, chief economist at Insurance Sweden, says: "Different countries may have different [regulatory] prerequisites, and therefore it is difficult to say whether a European-wide response is appropriate or not".
Many national regulators have already implemented their own measures to tackle the risk to solvency posed by low rates, which threatens to undermine EIOPA's legal mandate to promote "a sound, effective and consistent level of regulation and supervision" across Europe. The authority's opinion may be seen as a warning to national regulators that they must consider the impact of individual measures on the European-wide goal of harmonisation.
In February, the Swedish financial regulator announced it would introduce Solvency II's discount rate methodology for calculating the value of life insurance and pension fund liabilities next year in an effort to relieve some of the solvency burden on domestic firms. This followed similar action by the Danish and Dutch authorities last summer.
Experts suggest that EIOPA's opinion is a response to this slew of announcements by local regulators, as the authority attempts to prevent member states moving away from a harmonised approach. However, the nature of the action EIOPA wishes regulators to take is ambiguous at best. EIOPA encourages supervisors to "actively assess" the risks arising from low interest rates and "engage with insurance undertakings in exploring private sector measures to address the risks".
The authority specifies that it will conduct a "stock-taking exercise" in 2014 as part of its response to persistently low rates, although it is unclear what form this exercise will take.
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