The introduction of Solvency II in the European Union will come to be seen as an essential response to the problems caused by the financial crisis, said Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority, to an audience at Lloyd's.
"The potential benefits of having a more consistent approach to regulation and supervision in Europe are fundamental, especially looking at the role of the European insurance industry in the global community," Bernardino said in a lecture hosted by the Insurance Institute of London.
"We are living, of course, in exceptionally challenging times," he said. "The current crisis touches fundamental aspects of all of our economies."
Europe's place as the world's most powerful center of insurance must be preserved, Bernardino said.
EIOPA's goal to this end is to "create this truly European supervisory culture," he said. "One thing I know: It's not a U.K. culture, a German culture, or a French culture. It needs to be a European culture."
As part of its encouragement of the creation of wider international standards, Bernardino said, EIOPA has advised the European Commission on moves by Bermuda and Japan toward equivalence with Solvency II.
Bernardino became chairman of the Committee of European Insurance and Occupational Pensions Supervisors, better known as CEIOPS, in 2009 after serving as the Portuguese insurance regulator. He became chairman of EIOPA after it replaced CEIOPS in 2011.
In addition to promoting financial stability, EIOPA seeks to protect the public interest, Bernardino said. "We are a public authority," he said. "We have public values."
EIOPA has sought to promote good practice in the variable annuities market and encouraged efforts to improve financial literacy, he said. EIOPA also published guidelines on the handling of complaints by insurance companies and released research on consumer trends.
One problem in the consumer arena, Bernardino suggested, is that documentation may contain too much information. It would be better to offer more "comparable, standardized information" and less of it. This principle applies on both the life and nonlife sides, he said.
More work is needed, Bernardino said, in such areas as the effects on consumers of payment protection insurance and the increased use of price comparison websites.
The low yield investment environment has implications for the stability of insurers, Bernardino said. EIOPA expects this climate to continue for years.
While the financial crisis has been recognized as a banking crisis, it has affected the insurance sector. A major lesson has been the need for financial institutions to use "robust and realistic risk assessment," according to Bernardino.
Risk can be mitigated or controlled, Bernardino said, but it cannot be made to disappear. "You cannot continue to ignore the reality of the risks," he said.
Sean McGovern, Lloyd's director for North America and general counsel, told the audience that the changing structure of regulation has been demonstrated by the creation of EIOPA at the European level and plans in the United Kingdom to abolish the Financial Services Authority and replace it with a "twin peaks" regulatory approach.
"It seems everybody is talking about Solvency II," McGovern said, noting the extensive coverage its introduction is receiving in the non-insurance media.
To hear an interview with Gabriel Bernardino go to http://www.ambest.com/media/MA.asp?lid=latestaudio&vid=bernardino312
Lloyd's has a current Best's Financial Strength Rating of A (Excellent).
(By Robert O'Connor, London editor: mailto:Robert.OConnor@ambest.com)
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(c) 2012 A.M. Best Company, Inc. |
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A.M. Best Company, Inc. |
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