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Insurance Regulation

Context

In 2020, despite the considerable volatility in financial markets during the first half of the year triggered by the global Covid19 pandemic, the global insurance sector remained resilient, supported both by supervisory, monetary, and fiscal measures, and the regulatory capital base which was bolstered by the reforms implemented since the 2008 financial crisis.

The regulators globally, are thus committed to complete the delivery of post-crisis reforms i.e., the International Capital Standards 2.0 which are subject to a 5-year monitoring period, and the holistic framework for monitoring, assessing, and mitigating systemic risk in the insurance sector.

However, regulators are paying particular attention to emerging vulnerabilities such as those accelerated by the Covid-19 crisis as well as technological innovation, in addition to cyber and climate risk, in order to adapt national and regional regulatory and supervisory practices accordingly and to achieve consistent approaches for internationally active insurance groups.

Their attention is all the more important because these emerging risks also challenge financial stability and macroprudential supervision, even though some of these risks do not necessarily originate in the financial sphere.

In the EU, these emerging challenges add to an unprecedented monetary condition that have neither not been anticipated in 2016 when Solvency II started to be applied. In addition, despite the favourable political context of the Capital Markets Union, and the fact that the framework was designed to provide accurate risk assessments, EU insurance undertakings have been retreating from investments in long-term projects and companies although life insurance companies are natural long-term investors. The review of Solvency II framework now initiated by the EU Commission, should be the occasion to address those multiple challenges.

Contributions to the policy debate

Extracted from the main Eurofi publications (Regulatory Updates, Views Magazines and Conference Summaries)