20 January 2020Law & regulation

Amice calls for proportionate application of Solvency II for smaller insurers

The Association of Mutual Insurers and Insurance Cooperatives in Europe (Amice) has called for more effective use of proportionality in the application of Solvency II rules.

Solvency II rules have created a disproportionate regulatory burden for small and medium-sized insurers, Amice said, “which does not properly reflect their risk profile or provide commensurate policyholder protection.”

Amice said it “supports proposals to increase the thresholds at which Solvency II applies to small insurers, to apply an appropriately calibrated regime for medium-sized insurers, and to ensure that the principle of proportionality works consistently in practice.”

Otherwise, Amice called for moderation in this year’s review of Solvency II regulations, which it said represented an opportunity for “the adjustment of certain elements” of the rules.

“This review should not result in a revolution,” Amice warned. “It is important that this is not used as an opportunity to increase the regulatory burden; it is an opportunity to improve the current system in the light of four years’ experience since its implementation in 2016.”

Amice was responding to the European Insurance and Occupational Pensions Authority’s (EIOPA) call for advice for the 2020 review. In October EIOPA published a comprehensive consultation paper that suggested wholesale updates to Solvency II, including a review of the long-term guarantee measures and the introduction of new regulatory tools, as well as revisions to the existing framework.

The review created an opportunity to reduce procyclicality and rebalance capital requirements for certain investment classes, Amice said. It argued existing regulatory tools have been effective in regulating the sector, noting that “there is little evidence that [insurance] contributes to systemic risk, particularly within the mutual sector.”