Many disappointed at outcome
A key plank of new regulation that would have allowed insurers to operate more effectively across borders has been dropped following pressure from a number of European governments, writes Ellen Bennett.
Group support, which would have allowed multinational insurers to be regulated by a lead supervisor in their home state rather than supervisors in each country of operation, has been removed from the Solvency II legislation agreed in Brussels last week.
Stephen Haddrill, the ABI’s director-general, said the association was “very disappointed” by the decision.
The removal was a compromise agreed under pressure from governments – including Spain, Poland and France – that opposed group support, fearing it would limit their power to regulate companies operating in their territory.
The rest of the Solvency II framework has been agreed, however, and is on course to be implemented by 2012.
Haddrill added: “Capital requirements will still be set in each country a firm operates in, and not set centrally by their lead supervisor. The [financial] crisis has shown the lead supervisor for a firm needs to look across boundaries and ensure risks across the group are properly managed and capitalised as a whole.
“A directive with group support would have been world leading. This directive is not.”
He welcomed the rest of the legislation, however, saying: “We support the directive, which will ensure that the risk-based approach adopted in the UK over the past five years will be applied across the EU. This approach has ensured that the UK insurance industry went into the current crisis well capitalised and continues to weather the storm.”
The European parliament has inserted a clause in the legislation saying the concept of group support will be reviewed in 2015.
Peter Skinner, the MEP in charge of steering the legislation through the parliament, said: “We’re really disappointed we’ve not got group support in now – but had it not been for parliament insisting it will be reviewed, we would not have group support being talked about in the way it is now.”