Dáil Éireann Debate, Tuesday - 12 February 2019
164. Deputy Michael McGrath asked the Minister for Finance his views on the effectiveness of regulation of insurance across the EU and Solvency II directive 2009 in view of the number of insurance firms that have collapsed; and if he will make a statement on the matter. [6529/19]
View answerThe Solvency II Directive (2009/138/EC), which entered into force 1 January 2016, sets out new, more comprehensive EU-wide requirements on capital adequacy and risk management for insurers. It was transposed into Irish law via the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015).
Solvency II represents a significant change to the regulatory framework for insurance and introduced for the first time a harmonised regime for insurance regulation across the EU. It has brought a number of significant changes for the insurance industry, including better alignment of capital to risks, better risk management and governance and increased transparency. Since its entry into force on 1 January 2016, Member States, EIOPA and national supervisory authorities are working towards greater consistency in the application of these new standards across the EU. This should mean that, over time, insurers are better regulated thus reducing the possibility of consumer loss or market disruption.
In order to ensure it remains fit for purpose, Solvency II will be subject to a review in 2020 which will provide an opportunity to adapt the regime in light of changes in market conditions and insurer business models.
The provision of cross-border insurance is an essential part of the Single Market and Ireland in particular is a beneficiary of this regime through its significant cross-border life industry. However, it is acknowledged that there are obvious difficulties which arise when an insurer fails, as we have seen in this country over the last number of years. That said however, it is important to point out that Solvency II is not a 'no-failure' regime as it would not be possible to build a viable system that provides a cast iron guarantee that no insurer would ever fail. Any such regime would require very large capital requirements which would be likely to make insurance prohibitively expensive.
Consequently, I believe it is important that EU supervisors properly and consistently supervise the insurers that they authorise, and that there is greater communication between supervisors across the EU about their respective companies conducting cross-border business. The Deputy should also be aware that as part of the ongoing review of the European supervisory architecture, there is a proposal to further improve cross-border co-operation and communication through the strengthening of Cross-Border Collaboration Platforms. These already operate on an ad-hoc basis, however this proposal would ensure a more formal structure is put in place where an insurer is doing a lot of cross-border business. This would therefore give the supervisors of countries into which insurance is written a greater insight into how the business is being conducted.
Finally, whilst currently in the event of failure of an insurer there is no harmonised insurance guarantee regime nor a recovery and resolution or guarantee schemes across the EU, there have been a number of reports and initiatives in this area in recent years including a recent EIOPA opinion and project work. In addition, there is a proposed amendment to the Motor Insurance Directive which would oblige member states to set up Insurance Guarantee Schemes to cover the cost of insolvent motor insurers including any cross-border business they conduct. If progress can be made on these proposals, it is likely over time to provide a greater level of protection to policyholders and claimants in the event of a failure of an insurance company.
