(Reuters) – The European Union proposed on Wednesday that we change the block's capital rules for insurance companies to release € 120 billion ($ 141 billion) for the repair of a COVID-19 economy and to meet climate targets without deteriorating the protection of policyholders.  The UK, home to the world's largest commercial insurance market and left the EU in December last year, has also begun reviewing the capital rules known as Solvency II. It will examine how Brussels' changes can affect London's competitiveness.
The EU also proposed a framework for the rapid and orderly closure of troubled insurance companies to avoid destabilizing the financial system, reflecting a similar trend with banks following the global financial crisis that led to taxpayers' rescue services.
Predicting concerns that it would back down on rules, the EU said Solvency II would remain the "gold standard."
"This is not a revolutionary change, these are gradual but important changes," EU Finance Minister Mairead McGuinness told reporters. "This is not a gift to the insurance industry."
The capital rules for Solvency II were introduced for EUR 1
They were due for a routine review, but the need to rebuild a pandemic economy and invest in green infrastructure to meet CO2 emissions targets increased urgently. addressing is needed, together with the need to better tailor Solvency II rules to smaller, less risky insurers.
The rule changes, which require the approval of EU states and the European Parliament, would free up EUR 90 billion in the short term and a further EUR 30 billion in the long term.
Sven Giegold, a German environmentalist in the European Parliament, said that the proposals were going in the "wrong direction" by ignoring advice from EU regulators and retaining or even extending "lobby-driven" exceptions from t he decision.
Olav Jones , Deputy Director General of Insurance Europe, an industry body, said he welcomed the EU's recognition of the need to reduce capital requirements, but only a "significant and permanent" capital cut would enable insurers to increase support for the economy and regain global competitiveness.
Brussels proposed to reduce the effects of the so-called volatility adjustment, which reduces the effects of short-term market measures on the insurance company's solvency.
from investing in long-term assets to green the economy.
EU Insurance watchdog EIOPA will conduct centralized climate stress tests for the sector, where insurance companies will also need to conduct a long-term climate scenario analysis, it said.
The Commission decided not to propose an EU – wide harmonization of national insurance guarantee schemes and said that it could entail significant costs for insurers and there was a need to focus on economic recovery. Catalog