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It is risky business to look so far ahead. But being a European supervisor is also a risky activity. Of course, as always every risk brings an opportunity, so this forward-looking voyage gives the chance to share some thoughts on important challenges for the industry.
I will touch on a number of issues viewed from 2025, all in a positive way:
The effects of risk based prudential regulation
By 2025, one of the most relevant and innovative changes introduced by Solvency II, the ORSA, proved to be a truly game-changer and definitely helped to promote a strong risk culture in insurance undertakings. Insurers relied more and more on strong risk management capabilities to deal with the different challenged posed by the economic slowdown, the low interest rate environment, the financial market volatility and the stress on sovereign debt.
It wasn’t an instantaneous move. It took time, commitment, effort and specially a clear tone from the top. CRO’s had a fundamental role in this process. In 2025 boards set, communicate and enforce a risk culture that consistently influences, directs and aligns with the strategy and objectives of the business and thereby supports the embedding of its risk management framework and processes. By 2025 CRO’s have an independent position, and use that independency to challenge everyone within the firm. In 2025 CRO’s are key elements in a board structure. CRO’s will not report to CFO’s.
Enhanced supervision
By 2025 insurance supervision is much more consistent in the EU. EIOPA’s efforts have paid off. The focus on better supervision initiated some years ago proved to be the right way forward. Not only is supervision now more preventive than reactive, but also more intensive supervision avoided the need for a continuous flood of new regulation.
Conduct and consumer risk is seriously taken
By 2025 insurers have incorporated in their governance systems adequate strategies and processes to deal with conduct and consumer risk. From product design to claims management, insurers take full consideration of the consumer related issues.
New consumer attitude prompts shifts in business
In 2025 consumers are more demanding; they are more aware of their rights. The ‘web generation’ demands greater transparency, comparability and flexibility from all service providers. Consumers demand more integrity and they don’t trust so easily. The perception of poor quality service is rapidly transmitted and exposed through social media networks.
Macro-economic context
By 2025 insurance companies are recognized as knowledgeable actors from a macro-economic perspective. Their increased role in providing retirement savings and the emergence of many public-private partnerships were instrumental in the business growth. This reinforced the investment power of insurers and made them interconnected with the real economy. By 2025 general banks are fully aware of the relevance of insurance for the economy and consider thoroughly the effects of monetary policy in the insurance markets.
International standards
By 2025 a global capital standard is also available for the insurance sector. International active groups are slowly becoming subject to a level playing field from the solvency perspective.