Michaela KOLLER, General Director, CEA - European Insurance and Reinsurance Federation
The main challenge for the CEA is to ensure that the regulatory environment for European (re)insurers is not unduly affected by either short-term or long-term regulatory changes stemming from the economic crisis. The CEA is working to ensure that any changes take into account the specific characteristics of insurance and are appropriate for the industry.
The CEA is monitoring and engaging in the debates on initiatives at EU and international level to change the existing supervisory architecture and on other legislative responses to the crisis in the supervisory and the consumer protection areas.
PRIMM: How does CEA intend to address the economic crisis and prevent
its future impact for the insurance market? What are the main challenges
the crisis continues to provide for the European insurance and reinsurance
markets and what development trends will facing these challenges drive
Michaela KOLLER: The main challenge for the CEA is to ensure that
the regulatory environment for European (re)insurers is not unduly affected
by either short-term or long-term regulatory changes stemming from
the economic crisis. The CEA is working to ensure that any changes
take into account the specific characteristics of insurance and are
appropriate for the industry.
The CEA is monitoring and engaging in
the debates on initiatives at
EU and international level to change the existing supervisory architecture
and on other legislative responses to the crisis in the supervisory
and the consumer protection areas.
The CEA is working to promote a positive image of the insurance industry
by demonstrating the general resilience of (re)insurers during the
crisis and by showing that insurance is not a driver of systemic risk.
CEA expects consumer protection issues to feature strongly in the work
plan of the new European Commission, partly as a result of
the crisis. For example, the Commission is expected to publish a White
Paper later this year or early next on possible legislation and options
for insurance guarantee schemes in the EU.
PRIMM: What are the key differences between the business
models of the banking and insurance industries and why the merger of
and insurance authorities is not advisable?
M. K.: The principal aim of insurers when investing in assets is
to cover their commitments to policyholders. Their assets’ allocation
is driven by the objective of matching the expected liability cash
flows in terms of amount, timing and risk. Insurers therefore generally
invest in products with well defined cash flows and risk profiles and
largely limit the risk profile of their investments so that it is in
line with their commitments to policyholders. The fact that insurers
do not use leverage to enhance their investment returns means that
they are less exposed to fluctuations in financial markets.
to other financial services provides, such as banks, insurers are also
characterised by the inversion of their cost/revenue cycles.
This means that insurers are primarily funded by policyholders’ premiums,
making them less exposed to liquidity risk and to any problems accessing
credit markets. Indeed, the insurance industry could be said to have
had a stabilising effect on financial markets as a result of its anti-cyclical
It is these differences in business models that necessitate
separate supervision for banks and insurers. The CEA believes that
coordination and cooperation arrangements between authorities are the
best way to achieve cross-sectoral consistency.
PRIMM: What does CEA think about the group supervision and the fact
that its introduction has been left out of the approved Solvency II
M. K.: The CEA has always made clear its support for group supervision,
arguing for effective cooperation and trust between supervisors and
a supervisory regime based on the economic reality of groups.
believes that carving out group support from the text of the Framework
Directive means that Europe has missed the opportunity to
introduce a tool that would have met the need for the efficient and
effective supervision of multinational groups.
PRIMM: Which is the main
purpose of the reforms to the EU’s
supervisory framework for financial services that were proposed by
the De Larosière Group and carried forward by the European Commission?
M. K.: The mandate of the De Larosière Group was to make
recommendations on strengthening European supervisory arrangements
in order to establish
a more efficient, integrated and sustainable European system of supervision
and to reinforce cooperation between European supervisors and their
The CEA welcomed the recommendations of
the De Larosière Group
and the EC’s subsequent Communication on supervisory architecture.
It strongly supports the transformation of the three Level 3 committees
that represent the EU’s insurance, banking and securities supervisors
into European authorities with the ability to make certain binding
decisions and with a mediation role. The CEA has, however, called for
greater representation of the insurance sector on the new European
Systemic Risk Council, even though the insurance sector is not a driver
of systemic risk.
PRIMM: Which of the relevant experiences accumulated
in the Western markets do you think would be transferable/suitable
for an emerging
market, as the Romanian one?
M. K.: Diversification is one of the fundamentals of the insurance
business model because it helps spread risk, which allows for the shifting
of risk for reasonable pricing. Motor insurance is still the most important
business line in Romania, but insurance companies in Romania are increasingly
diversifying their portfolio to other lines of business. This process
will make the Romanian insurance market stronger and more resilient.
PRIMM: Which would be the most efficient ways to enhance the public
financial education, including its attitude towards insurance?
M. K.: Financial education has a vital role to play in ensuring that
European citizens are equipped with the knowledge they need when making
important decisions for themselves and their families. Financial education
raises awareness and allows consumers to make appropriate choices when
considering, for example, how to ensure an adequate level of insurance
cover, how to organise credit or how best to make provisions for retirement.
Improving financial literacy in Europe is a societal challenge which
requires the contribution of a range of different stakeholders. Public
authorities, the private sector, academia and others can all play their
part when addressing knowledge deficits amongst consumers regarding
the wide range of financial products and services on offer. The European
insurance industry actively promotes financial literacy via a range
of excellent initiatives throughout Europe.
| Published on 26.10.2009