MEP Peter Skinner (S&D, UK) identified in his draft report four areas where an EU dimension to IGS is necessary:
1) Ensuring consumer protection in the event of the bankruptcy of an insurer
While unlikely, it is still possible that a (cross-border) insurer could become bankrupt, and policyholders with claims failing due may suffer losses as a consequence, absent an IGS.
2) Ensuring equal consumer protection regardless of the 'home' state of the insurer
Cross-border activity is likely to increase in coming years with more pan-European insurers moving from a subsidiary- to a branch-based model to take advantage of the capital benefits such as structure offers under Solvency II. With consumers therefore more likely to purchase insurance from firms operating from markets with differing or no IGS, there are obvious issues in relation to consistency of consumer protection.
3) Ensuring consumer protection in the event of fraud or mis-selling
Mis-selling or fraudulent activities by insurers or intermediaries can result in policyholders being subject to lower returns and/or losses as a result of factors other than the bankruptcy of an insurer. In order to ensure consumer confidence in financial services, an IGS should also cover consumer claims resulting from fraud or mis-selling, since from a consumer perspective there is no difference between policy losses resulting from insurer bankruptcy or mis-selling/fraud – all are ultimately the result of regulatory failure.
4) Ensuring taxpayer protection in the event of IGS failure
In certain markets where a single or small number of insurers dominate in terms of written premiums, bankruptcy could result in the taxpayer having to cover the cost of policy payouts, even if an IGS were present. From a European perspective this is a particular issue where the failed insurer is using a passport to export insurance premiums elsewhere within the EU.
Potential taxpayer exposure resulting from the failure of an IGS should be kept to an absolute minimum.
© European Parliament
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