09 September 2014

EIOPA: Insurance regulation and supervision – going global

Speech by Gabriel Bernardino, Chairman of European Insurance and Occupational Pensions Authority, on 3rd Conference on Global Insurance Supervision “Fit for Global Thinking?” in which he shared his view on whether EIOPA is fit for global thinking.

"The financial turmoil of the recent years demonstrated the urgent need for the development of robust international standards, for close cooperation and information exchange between supervisors as well as consistent supervisory practices.

In the recent decades the insurance business has become more globalized and more interlinked. For example, many European insurance groups have developed a significant presence worldwide, with growing businesses in a number of emerging markets.

At the same time, risks arising from this global exposure are also increasing and in order to identify and mitigate those risks in a timely manner, there is a growing need of risk/based supervision. It is fundamental to achieve more comparability and a truly level playing field between the main competitors in the world insurance market. This can only be done if we work at the worldwide level in developing more convergent global regulation and supervision.

In the regulatory area several positive steps towards global thinking have been taken:

• Worldwide, the evolution in the regulatory standard s in insurance has been remarkable. In many countries all over the world, risk/based regulation and supervision is already being enacted, with different nuances, but with lots of commonalities. In each continent, there are some countries which evidence good practices being implemented, including risk/based capital requirements, stronger emphasis on good governance and risk management as well as improvements in public disclosure.
• Development of Solvency II has been a catalyst for the international movement towards risk/based regulation and supervision ion. The Solvency II equivalence process has been instrumental in this regard.
• Already in 2011 EIOPA delivered Solvency II equivalence assessments of the Swiss, Bermudan and Japanese supervisory systems. In the course of last year, EIOPA assessed 8 further supervisory regimes / in Australia, Chile, China, Hong Kong, Israel, Mexico, Singapore and South Africa. Recently EIOPA has initiated the assessment of Brazil and we are finalising the basis for the analysis of the Canadian regime.
• Furthermore, the EU/US dialogue project has been essential in reinforcing the mutual understanding of the solvency regimes on both sides of the Atlantic, paving the way to more effective supervision.
• Furthermore, the work of the International Association of Insurance Supervisors (IAIS) has been instrumental in the progress made.
• Under a very challenging timeline the IAIS has begun to develop International Capital Standards, which include a Basic Capital Requirement (BCR), Higher Loss Absorbency (HLA) and Insurance Capital Standard (ICS).
• The Insurance Capital Standard (ICS) should provide the basis for the comparability of capital needs at group level for the international Active Insurance Groups.
• The introduction of global capital standards should help prevent regulatory arbitrage, increase financial stability, guarantee a level playing field and strengthen international supervisory coordination, for the benefit of the economy at large, consumers and the insurance industry.

In conclusion, I believe that we are taking the right steps to adapt insurance regulation and supervision to the challenges of globalisation. We are doing it in a cooperative spirit, building on the commonalities and understanding the differences. We are collectively becoming more and more fit for global thinking. I am proud to be part of this evolution.

Full speech

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