German insurance association GDV has added its concern about the future of Solvency II reforms. Welcoming final adoption of the directive amending Solvency II, Jörg Asmussen, general manager of the GDV, warned supervisors about the risks in the next level of designing technical details.
“The details that still need to be determined must not jeopardise the progress made in the directive,” Asmussen said.
Technical details are currently being prepared by insurance adviser to the European Commission Eiopa, which will form the basis of subsequent legal acts, but concrete results from the level 2 negotiations are not expected until mid-2025.
European risk management association Ferma has also warned supervisors to ensure that technical details are in line with the text agreed at political level, in particular raising concerns about proportionality as a principle to reduce the reporting burden on small and non-complex undertakings.
“When designing the technical details, it is now important to take the industry’s long-term obligations into account,” the GDV said. In particular, it said insurers are concerned that existing valuation methods for long-term liabilities is maintained.
“A stable calculation basis is essential, particularly for life insurers, whose obligations often run for several decades,” the association said. Asmussen explained that technical adjustments could lead to changes in how the long-term interest rate is calculated, which currently takes into account inflation and interest rate expectations, and ultimately causes greater fluctuations in provisions and “an unnecessary burden” on companies’ equity.
“The tried-and-tested method, which begins in year 20, on the other hand, offers the necessary stability and predictability to continue to be able to reliably offer long-term guarantees,” Asmussen said.
Asmussen also warned supervisors to keep new requirements low for insurers under the forthcoming Insurance Recovery and Resolution Directive (IRRD), which was agreed by the Council at the same time as Solvency II reforms. Insurers will need to develop preventative plans in the event of a crisis, in particular in times of financial distress...
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