GDV calls for deepening the Capital Markets Union - Proposals for less regulation

“In order to make regulation more efficient, the rules should be better coordinated at national, European and international level,” said Jörg Asmussen, Chief Executive Officer of the German Insurance Association (GDV), in Berlin on Tuesday. “Where a European framework is introduced, existing national rules can be removed.”

Asmussen cited the further development of the Capital Markets Union as a key building block on the path ‘to greater competitiveness, prosperity and resilience in Europe’. Although work has been underway for more than ten years, progress has been limited and the European financial markets remain fragmented.

“In order to further develop the Capital Markets Union, national interests must be put aside in favour of a larger European idea,” Asmussen argued. “After all, a large and liquid capital market is a key building block for the EU's competitiveness in the global context.”

Asmussen highlighted investor protection as an example of a deepened Capital Markets Union. "We should find a new set of instruments for settling cross-border investment disputes as quickly as possible. Our proposal is to establish an EU investment court or an EU ombudsman procedure,” Asmussen explained.

GDV survey on regulatory density

The association's own survey shows how strongly the regulatory density for insurers has increased, particularly at EU level. “In the last legislative period, the European Parliament, Council and Commission introduced 77 legal acts in the area of financial and distribution regulation that affect us as an industry,” said Christoph Jurecka, member of the GDV Presiding Board and Chair of the Presiding Committee on Corporate Management and Regulation, ‘’These documents comprise around 10,000 pages of text. In addition, there are 55 non-legislative regulations from the European Insurance and Occupational Pensions Authority (EIOPA) with a further 900 pages.” In addition to the European level, the regulatory density has also increased at national level, for example in tax law.

Expanding reporting and information obligations is counterproductive

In many cases, the association expressly supports the objectives of regulatory initiatives, such as climate and consumer protection. “However, the increasing regulatory density has unintended side effects that counteract these important objectives. In particular, the massive expansion of reporting and disclosure obligations is counterproductive,” Jurecka says. It makes it more difficult for new companies to enter the market, which weakens competition and reduces product choice for consumers.

Against this backdrop, the GDV is urging policymakers to reverse the trend. “We insurers are proposing a structured programme for efficient regulation, which we believe has great potential for improvements. In addition, we are proposing an assessment and revision of tax regulations and have prepared nine proposals for simplification.”

“Inflated reports are a waste of resources”

Jurecka named sustainability reporting, which is governed by the Corporate Sustainability Reporting Directive (CSRD) and twelve reporting standards known as ESRS, as a key example: “With the new CSRD, the legislators have unfortunately only succeeded to a very limited extent in restricting themselves to the really relevant content and key figures.” The first CSRD reports for the 2024 financial year will therefore also be very extensive.

“Inflated reports are a waste of resources,” Jurecka says. It can be difficult for users to distinguish between relevant and less relevant information. The great efforts for the reporting companies are also reflected in the costs. “The estimate of € 1.4 billion per year given by the German government for the 13,200 German companies affected is probably too low,” Jurecka highlighted.

Reduce complexity and volume

As the framework for sustainability reporting has not yet been finalised, the GDV suggests examining whether further sector-specific reporting standards are necessary. “If this is the case, overlaps between cross-sector and sector-specific standards should be avoided by all means,” Jurecka said. With regard to further standards at international level, he added: “Complexity and volume should be reduced, and international and European standards should be compatible.”

The association also sees a need for reform in Solvency II reporting.  Here, insurers must inform consumers and the public about their solvency and financial situation annually in a Solvency and Financial Condition Report (SFCR). “The report is unsuitable for consumers due to its length and depth of detail,” Jurecka explained. Public interest in these reports is also low, with an average of nine downloads per month found in the latest GDV survey.

“We therefore propose abolishing the SFCR in its current form,” Jurecka said. Instead, companies should be obliged to publish their solvency ratio on the company website. The obligation to publish quantitative data for professional users, on the other hand, should be retained. “This would be an important step towards more consistent and streamlined regulation for the insurance sector.”