Insurances/Solvency II: Commission and parliament put profits before prudence

We are convinced that the problems of many insurers in the low interest rate environment may not be covered up by manipulating technical prudent rules. It must be tackled by reforms in the secotr, stronger supervision and regulation included limits to pay and dividends.

The risk that life insurers will not be able to meet their long-term promises to policyholders has been increased thanks to the Commission putting profits before prudence.

The rules in question were contained in a so-called delegated regulation: a form of legislative act that is meant to set out the techncial details for calculations etc, in line with what the co-legislators agreed in the main legislative act, in this case Solvency 2 which defines the minimum safety standards for runnign an insurance undertaking.

In this case, CEIOPS, the predecessor of the current European agency for Insurance supervision, provided detailed technical advice to the commission on a range of matters, including the minimum reserves required to absorb potential future losses and prudently cover expected payments.

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