Calls for further assessment of various European rules and potential alternatives

The CEA, the European insurance and reinsurance federation, has responded to the European Commission’s Consultation Paper on Insurance Guarantee Schemes (IGS), calling on the commission to carry out a full assessment of existing national arrangements before deciding on any further steps.

The CEA agrees with the EC that policyholders and beneficiaries should be protected against the risk of insurers becoming insolvent and being unable to fulfill their commitments. It believes that the most important protection for insurance consumers is an effective, efficient system of prudential regulation for insurers. However, it also recognises that neither the current nor the future solvency regime in Europe can provide a 100% guarantee.

The CEA welcomed the report by Oxera, commissioned by the EC and published in January, which provided a detailed summary of existing IGS and of the issues that the commission should consider before taking action. “We welcome the debate and recognise that the Oxera study was a step forward. However, there is still work to be done,” said Michaela Koller, director general of the CEA. “Clearly an EU directive harmonising IGS in all Member States would be difficult to achieve.”

The CEA notes that some EU member states have adopted alternative mechanisms that were not considered by the Oxera report and that work effectively and are adapted to the particularities (size, concentration and culture) and needs of respective markets. The CEA therefore recommends that the commission undertakes a further analysis of these alternative national arrangements.

In Austria, for example, premium reserve funds operated by insurance companies and the supervisory authority act as an additional safety net on top of solvency rules.

If the Commission ultimately concludes that there is a need for EU harmonisation on IGS, the CEA believes that such an initiative would have to be preceded by a serious economic impact assessment evaluating the probability of a market failure and justifying the feasibility, utility and efficiency of an IGS in providing Member States with sufficient flexibility to adapt solutions to the needs of their markets.

“An IGS might be an appropriate solution in some markets, while in others the objective of consumer protection might better be achieved via other arrangements,” said Koller.