Representatives from the French and Irish insurance associations urged greater supervisory harmonization across Europe following difficulties in their countries caused by recent high-profile insurer failures.
Under the financial services passporting regime, insurers based in the European Economic Area can operate anywhere in the zone using just the license from their home country regulator.
Speaking on a regulation panel at the European Insurance and Occupational Pensions Authority annual conference Nov. 20 in Frankfurt, French Insurance Federation CEO Philippe Poiget said, "It is very important to improve the cooperation between national supervisors," particularly when insurance contracts in certain countries have specific requirements, such as French construction.
Builders in France have to provide a 10-year guarantee on their work, which should be backed by liability insurance. Several now-defunct insurance companies, such as Liechtenstein's Gable, Gibraltar's Elite and Denmark's Alpha, provided dommages-ouvrage cover in France, which pays homeowners if, for example, the builders dispute liability for a defect under the 10-year guarantee.
Poiget said signs started to emerge in 2013 in the French market "that there are some problems with foreign companies, especially from places where supervision at the national level was not strong enough."
He added: "It is very important to be sure that in these countries the effort has been made by the national supervisor to have a comprehensive approach on long-term warranties in this kind of insurance contract."
Poiget said the relevant national supervisors, together with EIOPA, were working together to ensure that such problems did not recur.
Sharing responsibility
Speaking on the same panel, Kevin Thompson, CEO of Insurance Ireland, said Ireland is a heavy exporter of insurance cover to other European countries and that "there is an element of responsibility that comes from a regulatory point of view and from an insurance point of view in conducting that business."
He noted that although Irish regulators protected policyholders after the failure of local insurer Quinn Insurance in 2010, "unfortunately that same level of responsibility was not forthcoming both at a regulatory stance and at a policy stance" following the 2014 failure of Setanta, a Malta-domiciled insurer that passported into Ireland.
"It is about the harmonization of standards and raising the raising of standards on a cross-border basis," Thompson said. He noted that the Solvency II insurance capital regime helped standardize prudential regulation, but added: ""I think the piece that has been missed is standards relating to conduct and how conduct is managed."
He also echoed Poiget's calls for greater cooperation between insurers' and brokers' home regulators and the supervisors in their host countries, pointing out that "the responsibility of the intermediary market is the host regulator."
Thompson said: "If we don't move towards that cooperation between [regulators] at home and host, I think there is an ongoing risk going forward for consumers."
The comments came after EIOPA Chairman Gabriel Bernardino called for more focus on conduct regulation and greater powers for the pan-European regulator to tackle cross-border insurance failures.
National interests
Also speaking on the regulation panel, Rimantas Šadžius, a member of the European Court of Auditors, said part of the problem was that some regulators are mainly focused on activity in their own country and pay little attention to what companies they regulate are doing elsewhere.
He gave an example where several regulators approached EIOPA with concerns about an insurance company that was writing business mainly outside its home country, charging "unusually low" premiums and growing rapidly. Following an EIOPA intervention, the insurer's home regulator found that the company was financially distressed, and it was shut down, but Šadžius noted that the home regulator had previously disregarded the company because the largest part of its business was written outside the country.
He said: "It is our recommendation to go towards better European integration."
On Nov. 14, the European Court of Auditors published the findings of its audit of EIOPA, which concluded that the regulator had made good use of the tools at its disposal, but had a number of "systematic challenges" relating to cross-border businesses and internal models.
Patrick Hoedjes, head of EIOPA's oversight department, reiterated calls for EIOPA to have more powers to intervene in cross-border insurance regulation.
"We are not asking for a revolution" of the regulation underpinning EIOPA, he said. "We simply want a couple of tweaks that allow us to cross these bridges because I think there is a willingness on both sides to work together."
He added that it was clear that within EIOPA's existing framework, "we have reached the limits of what can be done."