In this speech, Bernardino focuses on a comprehensive approach to supervisory convergence; the evolution of the PEPP in the context of the CMU; the priorities of the consumer protection agenda and next steps and challenges on the regulatory front.
Speech at the EIOPA 6th Annual Conference in Frankfurt.
European Insurance and Occupational Pensions Authority’s (EIOPA) comprehensive approach to supervisory convergence
Along the years many times it was debated the risks and opportunities of Solvency II for the insurance industry. But the implementation of Solvency II brings also challenges to supervision.
The key challenge for EIOPA in the coming years is to build and put in place a common European supervisory culture. To ensure supervisory convergence in the European Union internal market, the insurance supervisory community needs to develop common ways of thinking, behaving and working. This implies a common interpretation of the laws and regulations, a common understanding of supervisory objectives and a common view on the key characteristics of good and effective supervision. This is a journey and EIOPA is working together with all National Supervisory Authorities (NSA’s) to deliver the desired outcomes.
The Pan-European Personal Pension Product and the Capital Markets Union
One of the major challenges for countries in the European Union is the provision of safe, adequate and sustainable pensions to their citizens. While there is a broad consensus that both private occupational and personal pensions can play an important role in diversifying the sources of retirement income on top of the public pension regimes, the context of labour and demographic changes and the prolonged low interest rate environment creates particular challenges also to private regimes.
At the same time, particularly in the area of long-term retirement savings, it is evident that the European Union internal market is far from delivering its full potential. There is a huge fragmentation of products available to consumers, from low-performing deposits, to very often too complex and costly life insurance and mutual funds, many of them not truly retirement saving products. Also consumer protection rules are very different in the various European Union Member States. This fragmentation is a serious obstacle to cross-border business, increases the costs, reduces the average returns for savers and ultimately undermines consumer confidence in private pension provision.
The priorities of EIOPA’s Consumer protection agenda from the implementation of the Insurance Distribution Directive (IDD) to digitalisation
EIOPA places consumer protection, both through prudential and conduct of business regulation, at the centre of its strategy. Misconduct by firms may not only harm individual consumers, but may also have a wider prudential impact, posing a threat to the stability of the financial sector.
In this context, the implementation of the Insurance Distribution Directive (IDD) is a significant step forward. EIOPA has already consulted on its draft technical advice to the European Commission on possible delegated acts on issues like Product Oversight and Governance, Conflicts of Interest, Inducements and Assessment of suitability and appropriateness.
EIOPA‘saim is to ensure that the interests of the customers are taken into consideration throughout the life cycle of a product, that distribution activities are carried out in accordance with the best interests of customers and that customers buy insurance products which are suitable and appropriate for them.
The next steps on the regulatory front and the challenges therein
Going forward, regulatory certainty is an important value that we all should preserve. The review of Solvency II should follow the structured process envisaged in the legislative texts: by 2018, the review of the Solvency Capital Requirement (SCR) and by 2021, the overall review of the regime, including the treatment of long-term guarantees.
Following the recent call for advice received from the European Commission, EIOPA will issue a discussion paper on the review of the Solvency Capital Requirement (SCR) before the end of this year. During 2017 through a series of roundtables EIOPA will engage with all relevant stakeholders. EIOPA is committed to an evidence-based policymaking. Changes must be carefully justified and clearly necessary. EIOPA is particularly interested in concrete proposals to ensure more simplicity and proportionality.
While Solvency II is undoubtedly a great achievement for the European Union insurance sector and for the protection of policyholders, there are still some areas where progress is needed to complete a comprehensive European Union insurance regulatory framework.
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