Representatives of the European insurance industry have written to the European Commissioner for the Internal Market and Services, Michel Barnier, to ensure that the "overly conservative and prescriptive" elements it believes are contained in the draft implementing measures for Solvency II are addressed.
The letter, dated 29 March, stresses the need for changes to be made to "overly conservative" elements of the new regulation, set to be enforced in 2013: "It is absolutely imperative that changes are made to the overly conservative approach being adopted in several areas."
The letter is co-signed by the CEA, the European insurance and reinsurance federation; the Pan European Insurance Forum; the CFO Forum; and the CRO Forum.
In it, the insurance industry stresses its full support for the principles set out in the Solvency II Framework Directive, and its willingness to engage constructively with the Commission and the European Insurance and Occupational Pensions Authority (EIOPA) to solve outstanding issues.
The letter details the areas in which changes are sought to the measures being proposed by EIOPA.
The bodies said that while the fifth quantitative impact study (QIS 5) demonstrated the relative health of the European insurance industry, it confirmed that some areas of the implementing measures need "correction".
The letter said such corrections included: a more balanced calibration of certain requirements, the tackling of pro-cyclicality and volatility in the Solvency II framework, according to the European body.
The need to address "unnecessary complexity" was also an issue, it said.
The letter further argues that Solvency II will have failed to achieve its underlying principles if these problems are not addressed.
It argued such a failure could:
• hamper insurers' ability to offer policyholders appropriate long-term protection at a fair price, in the shape of pension or long-term care products;
• penalise the diversified growth of insurance companies, at odds with the EU Single Market Strategy;
• introduce a complex, inconsistent and volatile prudential framework that would neither guarantee financial stability nor policyholders' protection; and
• shorten insurers' investment time horizon.
Each industry body said they continued to be fully engaged in the joint EIOPA/industry working groups on the outstanding issues.
The letter has proposed a number of solutions, the combined application of which it said would address the issues identified as affecting the ability of insurers to continue to offer long-term savings and pension products.
The CEA is also currently analysing different proposals for ways to address issues related to asset/liability valuation mismatches, which affect products with long-term guarantees.
This article originally appeared on PostOnline.