Commission plan for the Savings and Investments Union falls short

The European Commission presented its strategy for the Savings and Investments Union (SIU). The aim is to channel more private and institutional capital into investments in the European economy, thereby strengthening the capital market and the competitiveness of the EU. From insurers‘ point of view, the Commission is falling well short of its own ambitions. In view of the enormous economic and geopolitical challenges, billions need to be invested in the economy, infrastructure and security. For the SIU to be a success, the investment environment must be shaped more attractively.

“As Germany’s largest institutional investors, the German insurance industry plays a key role in tackling the investment backlog. It already manages more than € 1.9 trillion today, financing roads, energy supply, businesses and public budgets. But while the industry stands ready, Brussels is hitting the brakes. The measures presented today look like a gift with pretty wrapping - but anyone who opens it will find little content. The Commission must finally wake up and think bigger in order to meet Europe’s investment needs," says Moritz Schumann, Deputy CEO of the German Insurance Association (GDV).

The German insurance industry already invests 70 percent of its portfolio in the European Single Market. Insurers are calling for targeted reforms so that they can realise their full potential as investors and make an even greater contribution to financing markets, infrastructure and retirement provision.

Major reforms instead of small-scale measures

The Solvency II prudential framework requires insurers to hold sufficient capital for extreme situations. The Commission now wants to create more room for manoeuvre by adjusting the requirements for long-term equity investments. However, this alone is not enough to cover the enormous financing needs of the economy, infrastructure and security. The GDV warns that without major reforms, barriers to investment will remain and Europe will lose out on the opportunity to strengthen its capital market. Insurers are key providers of capital - but they also need legal certainty. Stronger creditor rights in insolvency proceedings could significantly increase the potential for investment by all types of investors and noticeably boost cross-border capital flows in Europe.

Pension savings as an opportunity to mobilise capital

The SIU runs the risk of missing the potential of old-age provision for developing the EU’s capital market. From the insurers' point of view, a thorough review process of the Pan-European Personal Pension Product is overdue. Instead of sticking to rigid structures, a genuine reform is needed that mobilizes capital and effectively combats poverty in old age. So far, efforts to establish the so-called Pan-European Personal Pension Product (PEPP) have failed due to overly restrictive requirements and detailed specifications. Such a project needs flexibility in order to be able to respond to consumer needs and build on tried and tested products.

Tax benefits can play a key role in the uptake of European pension products. The problem is that tax benefits are almost impossible to agree at European level. The association therefore favours better integration of national tax incentives into EU initiatives.

About the Savings and Investments Union

The Savings and Investments Union is the successor to the Capital Markets Union originally proposed in 2014. It aims to harmonise the European financial market to a greater extent and facilitate investments across national borders. The European Commission's current strategy reaffirms this ambition. The Commission will present the announced legislative and non-legislative measures step by step. Where measures are of a legislative nature, the Commission’s proposals will be negotiated by the European Parliament and the Council.