Source: Mario Petrov¸ PKF Malta
The European Commission has proposed a ground-breaking revision of EU insurance law. The aim is to improve consumer protection¸ modernize supervision¸ deepen market integration and to increase the international competitiveness of European insurers.
According to the “Solvency II” system¸ the insurers are expected to measure all types of risks they have¸ invoice and handle them efficiently. In addition¸ insurance groups under the supervision of a group supervisor ‘that would enable better monitoring of the entire group’. The Commission wants the new rules to be put into practice in 2012. This proposal is part of the “Better Regulation” strategy of the Commission and its firm commitment to simplify the regulatory environment and to reduce the administrative burden. In this case 14 policies should be replaced by a single policy. The proposal now goes to the European Parliament and to the Council for consideration.
The Commissioner for Internal Market and Services Commissioner Charlie McCreevy said “This is an ambitious proposal¸ which has revolutionized the way in which we ensure the financial soundness of our insurers¸ we propose a unique model for the insurers to focus on managing all the risks they face and enable them to operate much more efficiently.
This good news for consumers¸ the insurance industry and the EU economy.”
What changed Solvency II?
With the new regulation¸ solvency requirements for insurance companies should more sophisticated and they should be more focused on ensuring that they have sufficient capital to cover disasters such as floods¸ storms or big car accidents. Currently¸ EU solvency requirements only cover insurance risks¸ whereas the insurers would be required¸ in the future capital mismanagement¸ to hedge the market risk (eg¸ impairment of assets of the insurance company)¸ credit risk (eg¸ failure to meet debt obligations) and operational risk (eg failure to maintain system). All these types of risk are a significant threat to the solvency of insurance companies¸ but are so far not covered by the current EU system.
<p style=”text-align: j