Solvency II review: Practical proportionality rules required
The EU Commission has initiated new proportionality regulations as part of the Solvency II revision. The EIOPA proposals, which are viewed critically by GDV, in particular the size criteria for relief for smaller insurers, hardly allow for uniform, Europe-wide application.
In the context of the revision of the Solvency II Directive, the European Commission has introduced new proportionality rules. The European Supervisory Authority EIOPA has now presented technical proposals, which were available for consultation until the end of October 2024. The German Insurance Association (GDV) sees a need for improvements, particularly with regard to the proposed size criteria and the extent of qualitative conditions.
While the EU's political ambitions are aimed at reducing administrative burdens on insurers, particularly for small and medium-sized companies, the GDV believes that EIOPA's current proposals miss the mark. The complex conditions for relatively smaller and less complex insurance companies, so-called non-SNCUs, would significantly increase the administrative burden and contradict the idea of cutting red tape.
No uniform solutions for size criteria
The size criteria proposed by EIOPA for non-SNCUs - € 15 billion in technical provisions in the life sector and € 2 billion in gross premiums in the non-life sector - offer broad applicability in principle. However, these rigid thresholds are not suited to the diversity of the European markets. In smaller countries, almost all insurers would remain below these limits and benefit from relief, although this is intended for relatively smaller companies. It is therefore likely that the EIOPA proposal will not be supported by these Member States.
A large market like Germany is not comparable to a small market like Malta. The GDV therefore recommends the application of relative rather than absolute thresholds, which cover 20 per cent of the respective national market. This approach, based on the rules on exemptions from quarterly reporting, would enable more standardised application across Europe, ensure greater transparency and prevent national supervisory authorities from granting relief excessively or inconsistently.
Qualitative conditions are overly complex
In addition to the thresholds, the GDV criticises the large number of qualitative conditions that are envisaged for non-SNCUs. With a total of four general and 14 specific criteria, the approach is unnecessarily bureaucratic and complex. The association is calling for these conditions to be completely removed and for the focus to be placed on a more pragmatic solution. The previous approach of allowing national supervisory authorities to grant proportional relief based on a company's risk profile has proven its merit and should be retained.
Implementation in groups: Practical approaches are lacking
Another issue that the GDV addresses in its consultation response concerns insurance groups. EIOPA's current proposals lack workable solutions, particularly with regard to planning and reporting simplifications. The association is urgently calling for improvements to ensure that groups can also benefit from proportional relief.
You can download the full consultation response here:
