The pan-European insurance regulator has called for more power to intervene when it thinks a cross-border insurer is at risk of failing.
At the European Insurance and Occupational Pensions Authority's annual conference in Frankfurt on Nov. 22, the regulator's Chairman Gabriel Bernardino outlined his vision for supervisory convergence in the EU and said "some fine tuning" is required.
Specifically, EIOPA believes national regulators should be obliged to give it early warning when they see that an insurance firm with operations in more than one country is struggling. This would allow EIOPA to act "more intrusively" to mitigate cross-border effects.
In response to a question from S&P Global Market Intelligence, Bernardino said this change would prevent a recurrence of previous real-world situations where the regulator has been forced to play catch-up.
"If we receive information from national authorities saying, 'Oh, by the way EIOPA, we have a company that is belly-up, and there will be some cross-border problems,' — what can we do, you know?" he said.
"We had a couple of situations where that occurred in the past, and to be honest, that is really suboptimal."
If local authorities have an obligation to inform EIOPA before a situation gets out of hand, it will allow the latter to carry out its role of coordinating supervision, to be preventive and to balance the interests of home and host policyholders.
Home and host supervisors have a specific mandate to protect their own policyholders, whereas EIOPA is mandated to look at all policyholders in Europe and try to treat them all fairly, he said.
Supervisory convergence
In his keynote address, Bernardino emphasized the need for supervisory convergence across the EU, saying modern-day cross-border activities mean the quality of national supervision "is no longer solely a national issue, but a European issue."
Speaking at the same event via a video link, Valdis Dombrovkis, the European Commission vice president in charge of developing the bloc's capital markets union, also stressed the need for better synchronization of insurance supervision.
Following the implementation of Solvency II capital rules and other post-financial crisis rules, the EU is shifting its main focus from regulation to supervision, he said.
"We want to improve the governance of the [European Supervisory Agencies] and enhance their ability to achieve supervisory convergence," he said. EIOPA, along with the European Banking Authority and the European Securities and Markets Authority, are responsible for the microprudential regulation of Europe's financial sector.
He said this would help to promote convergence in, for example, insurance companies' internal risk models, and forms part of the EU's work to build a capital markets union.
