Regulatory convergence in the European Union will not go as far for insurers as it has for banks, according to a European Commission official.
Asked by an audience member at the European Insurance and Occupational Pensions Authority's annual conference Nov. 19 whether there would be a Single Supervisory Mechanism, or SSM, for EU insurers, Didier Millerot, head of the European Commission's insurance and pensions unit, said: "We are not ready yet, politically, to go as far as we went for banks."
Under the bank SSM, the European Central Bank has the power to grant and revoke banking licenses and conduct onsite investigations.
However, Millerot added that it was important for national insurance regulators to work more closely together on enforcement and supervision. He said: "I think this is key."
Millerot also said, "I don't see us going as far in terms of recovery and resolution [of insurance companies] as we went for banking. That is not what is going to happen."
He was responding to an audience question on whether Europe-wide macroprudential and resolution measures were required. As part of the 2020 review of the Solvency II pan-European insurance capital rules, European Insurance and Occupational Pensions Authority, or EIOPA, has proposed introducing new tools to tackle macroprudential issues, recovery and resolution of insurance companies, and insurance guarantee schemes, which pay policyholders when insurers are no longer able to.
Millerot declined to say outright whether or not such tools were needed, noting that "it will depend on an assessment which we still need to make."
But he added that the EC had asked EIOPA for advice and that "we certainly think it is an area we need to look [at]." He said whether more harmonization of insurance guarantee schemes across Europe was needed "is a question I think we need to ask ourselves."
Long time coming
EIOPA is in the process of consulting on the advice it plans to give to the EC for its 2020 review of Solvency II, which needs to be completed by the end of 2020. EIOPA plans to submit its advice in June 2020, following the consultation, which closes Jan. 15.
However, insurers will need to wait beyond 2021 for any changes to Solvency II to take effect. Millerot pointed out that the Commission's submission of any proposals to change the Solvency II framework following the review "is far from being the end of the story."
The EC would need to work with co-legislators — the European Parliament and the Council of the European Union — which, given the technicalities and the political importance of the insurance industry, "is going to take some time," he noted.
As such, "I don't see the adoption of the proposals before, let's say, the end of 2022," he said, adding that following adoption, any new rules would then have to be implemented into national rule books.