Today, on 23.04.2024, the European Parliament will likely adopt the review of the Solvency II directive. Henrike Hahn, Member of the European Parliament (The Greens/EFA), substitute member of the ECON committee and lead negotiator of the Greens as shadow rapporteur for Solvency II comments:

“Solvency II is a clear success for climate protection. Insurers must now seriously address climate risks as investors and risk managers in our European economy. Anything else would be unrealistic and damage ultimately the competitiveness of insurance companies.

Insurance companies will now be required to draw up and disclose transition plans that address sustainability and transition risks with the goal of climate neutrality. It is a clear green success that there are finally uniform rules on this at European level. This brings transparency and comparability.

Another green success is that the European Insurance and Occupational Pensions Authority (EIOPA) received a mandate to assess whether specific capital requirements should be set for sustainability and biodiversity risks.

It is more than regrettable that due to resistance from conservative and extreme-right groups and the majority of the member state the “one-for-one rule” for insurers was not introduced. According to this rule, insurance companies would have to fully cover the risks of every single euro invested in fossil fuels with one euro of own capital. It is no longer appropriate for insurers to be able to hold taxpayers doubly liable for their wrong decision in favour of fossil fuel investments: they should be liable for this with their own wallet but also for the consequences of climate damage.

It is extremely dangerous that massive capital relief for insurers was granted at the instigation of conservative and right-wing extremist forces in the European Parliament.

In times of increased financial stability risks, such capital relief, which falls within the general trend of financial deregulation at EU level, is particularly problematic. Without sufficient own capital, the next financial crisis in the event of insurance bankruptcies threatens to come at the expense of policyholders and taxpayers. A lot of lobbying pressure and the interests of individual member states play an unpleasant role here.

The insurance sector is now becoming safer when it comes to crypto assets. At the initiative of the Greens, the risks posed by these investments will be better reflected in the capital requirements in the future.

Under pressure from the Greens, we were able to tighten the suitability rules for management personnel with regard to money laundering and other financial crimes. We are now requiring insurers to set clear quantitative targets for gender balance in senior management."

 

I would be happy to answer any further questions.

 

 

Briefing for the vote on 23.04.2024

Today at noon (April 23, 2024) the European Parliament will vote on the provisional interinstitutional agreement between Parliament, Council and Commission of December 13, 2023, 'Solvency 2', which fundamentally reforms European prudential insurance law.

As soon as the current legal-linguistic revision of the final agreement is completed, a corrigendum to the text will be voted on again in the coming legislature. This vote is then only a formality; the European Parliament will give the substantive approval today.

After the vote on the corrigendum in the next legislative period, the final text will be published in the Official Journal of the European Union and will come into force twenty days after publication.

 

 

The Green Analysis

Long-term guarantees and equities:

• The calculation of the long-term guarantees and equities defines how much own capital insurers have to hold in order to meet their customers' claims in the future.
• Despite some damage limitation, we were ultimately unable to fully defend the push of the conservative and far-right group and some Member States, such as France, for more capital relief, also because the Commission's proposal already contained a reduction in capital requirements. This will make the insurance sector more unstable in the future.
• The risks emanating from crypto assets will in the future be better reflected in insurers’ capital requirements.

 

Sustainability and governance:

• Insurers are required to run climate change scenario as part of their own risk and solvency assessment.
• Insurers must draw up transition plans, including goals and milestones, and these must be disclosed. This way, the commitment of insurers to decarbonisation and climate protection can be tracked in the future.
• EIOPA is mandated to assess whether specific capital requirements should be set for activities associated with high ESG and biodiversity risks. Unfortunately, the "one-for-one rule" has not yet been introduced for insurers.
• Sustainability and climate change risks should be disclosed and integrated into risk management processes.

 

Other topics:

• The cross-border cooperation of supervisory authorities will be enhanced towards a completion of the internal market.
• Regulators gain new macroprudential powers in the event of liquidity or financial crises.
• In the future, policyholders will receive simpler and more targeted information on the solvency and financial situation of their insurer.
• Insurance companies must subject their balance sheets to regular audits.