(Finance) – Il Council of the EU and the European Parliament they achieved a provisional agreement on changes to the Solvency II directivethe main piece of EU legislation in the insurance sector, and on the new rules on the recovery and resolution of insurance companies (IRRD).
Changes to the Solvency II rules they will free up large sums of money that insurance companies had to keep in reserve, allowing the sector to channel more funds into the economic recovery and into the European Green Deal in particular, we read in a note from the European Parliament’s Economic Affairs Committee. Currently the cost-of-capital rate, which determines the level of reserves, is assumed to be 6%, while the agreement reached will bring this rate to 4.75%.
On the IRRD, negotiators agreed on the terms of a directive that will establish a recovery and resolution framework similar to the one already existing for banks. It will help deal with failing insurance businesses, thus ensuring that such businesses can be recovered or liquidated without taxpayers footing the bill.
The Commission proposal is improved making the system more selective, targeting more at the riskier parts of the industry and more focused on protecting policyholders. Furthermore, 60% (compared to the 80% proposed by the Commission) of the Member State’s life and non-life insurance and reinsurance market will be subject to pre-recovery planning requirements and 40% to resolution planning (compared to 70% as proposed by the Commission).
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