Solvency II proportionality principle key for avoiding excessive burden, but doesn’t work in practice

Monday, 30 September 2019

Solvency II proportionality principle key for avoiding excessive burden, but doesn’t work in practice



Insurance Europe and AMICE have issued a joint call for the EC to improve Solvency II proportionality rules to ensure that insurers are not disproportionately burdened by the regulatory framework.
While Solvency II and, in particular, its risk-based approach is supported by the EU insurance industry, changes are needed to rules on proportionality. This is because currently the sheer volume of rules imposed on companies can be disproportionate and unnecessarily burdensome relative to their activities and risks.
Proportionality is a vital element of Solvency II that was included to enable national supervisory authorities (NSAs) to exercise a proportionate application of regulatory requirements imposed on insurers, in relation to the scale, nature and complexity of their activity. As such, it can help all insurers to avoid unnecessary costs and can avoid smaller insurers being driven out of business due to regulatory requirements which are excessive relative to their activity.
EU insurers have warned that the principle of proportionality is, in practice, hardly ever applied under Solvency II and have jointly called on the European Commission to make changes. The industry’s proposed improvements would help to ensure that the principle of proportionality is applied effectively and consistently across all member states and across all three pillars of Solvency II. 

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