The politics of insurance regulation and supervision reform in the European Union

Abstract

In the late 2000s, the European Union (EU) undertook a significant reform of the framework for insurance regulation and supervision through the Solvency II directive, which substantially updated prudential rules and supervisory practices. This article addresses the question of what has driven the reform of the framework for insurance regulation and supervision in the EU. It is argued that the politics of the Solvency II directive was characterised by a strong alliance between the Commission and the United Kingdom, backed up by the large member states, some old member states and industry, particularly large companies and transnational groups. The United Kingdom was, however, the pace setter, whose influence was underpinned by the size of its insurance market; the expertise and effective coordination of national policymakers, and a state-of-the-art domestic regulatory model.

The regulatory path to healthcare systems’ financialization

“…The latter, in particular, played an instrumental role in the adoption of some of the text’s core concepts. In her extensive analysis of Solvency II, Quaglia (2011) has shown that the UK was indeed a ‘pace setter’ during the negotiations. By constructing alliances with the Commission and large transnational companies, its representatives were able to diffuse various norms and principles of their domestic model of insurance regulation (including ‘targeted risk-sensitive solvency requirements,’ ‘dual capital requirements,’ ‘the possibility of using firms’ internal models’ and a ‘non-zero failure approach’) to other European countries – where regulatory requirements were more often based on a ‘rule-based approach,’ ‘no market disclosure,’ a ‘zero-tolerance of failures’ and a largely more limited use of financial instruments (Quaglia, 2011).…”

“…During the negotiation, the French government (as were also its German and British counterparts) was essentially preoccupied with preserving the interest of its main domestic insurance companies. Lacking the resources to meaningfully participate in these debates, mutual benefit societies’ representatives were unsuccessful in their demands for a softer framework, and only the smallest insurance undertakings were eventually excluded from Solvency II (Quaglia, 2011). Mutual benefit societies then focused their lobbying efforts on more technical aspects, essentially around health insurance volatility under Solvency II calibrations – while preparing for implementation of the text, which was perceived as inevitable.…”

Risk premia and the European government bond market: new empirical evidence and some thoughts from the perspective of the life insurance industry

“…The establishment of a universal industry standard and the underlying political process are widely regarded as ambitious (see, for instance, Smith 2010 and Basse 2020 ). Amongst others, Quaglia ( 2011 ) and Van Hulle ( 2011 ), provide an overview of this political reform process and the underlying drivers. Despite its approval in 2009, the Solvency II Directive only entered into force in 2016.…”

Insuring individuals … and politicians: financial services providers, stock market risk and the politics of private pension guarantees in Germany

“…These different segments of the financial services industry offer very different types of pension products and have therefore diverging -and intense -preferences over pension plan regulation (Wehlau 2009). Insurance companies' business model typically relies on offering relatively predictable benefits paid out in the form of an annuity and is underpinned by industry-specific prudential rules and supervisory practices (Quaglia 2011). By contrast, mutual funds and asset management companies do not usually offer annuities and typically market pure defined-contribution products by promising high long-term returns from portfolios heavily invested in equities.…”