Consultation response on the review of Solvency II

21 October 2020

Consultation response

On 21 October 2020, Finance Watch published its response to the European Commission’s consultation on the review of prudential rules for insurance and reinsurance companies.

In our view, the primary goals of this review should be to make sure that the framework provides for financial stability, policyholder protection and addresses climate risks (which is linked to financial stability). This can be done, amongst other measures, by

  • introducing a harmonised Recovery and Resolution framework and an Insurance Guarantee Scheme (IGS);
  • introducing a liquidity buffer to address liquidity risks;
  • making disclosure to the public (so-called Solvency and Financial Condition Report) more consumer-friendly (concise and more understandable), while keeping all key information (including sustainability information);
  • strenghtening supervisory convergence and harmonization;
  • suspending dividend payments and postponing variable remuneration during crises (e.g. corona crisis);
  • increasing capital charges for insurance companies’ investments in activities and associated assets that are detrimental to the objective of a climate-neutral European economy;
  • adequately factoring climate-change related risks into the underwriting practices and products of insurers.