INSURANCE MATTERS

Insurance matters

2024

An important election year

2024 is a pivotal year for global politics, with elections impacting half the world's population and likely to have consequential results for the years to come. In the EU, in a few days, citizens will take to the polls to elect the next European Parliament. The elections will kick-start a series of institutional changes, including the start of a new European Commission mandate and new European Council Strategic agenda.

The current 2019-2024 EU institutional term was marked by unprecedented events, including the COVID-19 pandemic and a war in Ukraine. The list of wider global challenges includes climate change, an energy and food crisis, an ageing and shrinking working age population, inflation, national and geopolitical tensions, digitalisation, deglobalisation and disruption in supply chains.

In the current environment of increased uncertainty, Europe’s need for the protection and investment that the insurance industry can provide has probably never been higher. There is a growing need to work towards closing protection gaps, be they known but growing risks such as natural disasters or pensions, or those that have emerged more recently such as cyber risks.

Insurance matters

Our sector makes unique contributions to society by providing a wide range of protection and savings products to individuals and businesses and by investing long-term in the economy.

Yet, regrettably, we are increasingly confronted with the consequences of policymakers not fully understanding how our industry works. As we expect many new incoming members of the European Parliament to arrive in Brussels after the elections, Insurance Europe has, throughout this year, worked on a series of materials explaining the strategic role and importance of our sector, as well as its business model. This approach is also at the heart of our strategic vision and recommendations to the next European Commission and Parliament. We have worked closely with our members to produce succinct explanations of the value of insurance and of how insurance works. With the right framework conditions our sector’s contributions to key societal and economic challenges, including climate change, health, digital transformation, competitiveness and fostering the EU Capital Markets Union can make a real difference.

The Global Federation of Insurance Associations (GFIA) is also increasingly focusing on efforts to explain how significant insurance is for society, highlighting the sector’s role in providing an additional layer of protection for citizens and businesses. This year, GFIA has launched a publication highlighting the unique features of insurance compared to other financial sector players, notably banks and non-banks (see article here).

“With the right regulatory conditions our sector’s contributions to key societal and economic challenges, including climate change, health, digital transformation, competitiveness and fostering the EU Capital Markets Union can make a real difference.”

Regulation matters — key challenges and recommendations

For insurers to play their role as both providers of protection and institutional investors, a fit-for-purpose and future-proof regulatory framework is of paramount importance. Sound and trusted regulation is vital for healthy EU industries that can thrive at home and abroad. Unfortunately, in recent years, regulation has become more complex, and an unnecessarily high regulatory burden has been put on the insurance industry. The reasons for this vary, ranging from the sheer amount of new regulation proposed in recent years to the fact that regulation is often not tailored to the specifics of our sector.

Starting with the former, in the current European Commission mandate, regulation has significantly increased. For example, there were 12 texts in 2012 and there are about 70 which are or will be applicable going forward. While they are not all targeted specifically to the insurance sector, the insurance sector has to comply to them all. In this respect, it is positive that the European Commission, with their target to reduce reporting burden by 25%, has recognised that there is a need to reassess and reduce reporting for EU businesses. However, it is important that this very good statement of intent is turned into real and meaningful reductions in practice for European insurers. The EC should also focus not only on reducing existing reporting requirements but implement a number of principles when proposing new regulatory initiatives (see article here).

Beyond this, regulation is currently often not fit to cater to the unique features of the insurance business model. It is key that those with knowledge of insurance and expertise in the sectors’ regulation are involved in its development from the onset. To this end, the European Commission should set up an “insurance expertise centre”, which would serve as an insurance knowledge hub across Directorate-Generals. Such a centre would ensure that the regulation will work for insurers and meet the intended objectives without compromising insurability and, ultimately, sustainability and resilience.

Creating a dedicated insurance expertise centre would also help to deepen the awareness of the essential role that data plays in the ability of insurers to underwrite risks. Indeed, the use of and, primarily, access to, data is fundamental to the provision of insurance services. Data enables insurers to assess the overall risks and make sure that future claims are being paid. As such, data is at the heart of the sustainability of the business model and the ability of insurers to provide security and protection. We however observe that insurers’ use of and access to data is under increasing threat, which is another reason why we continue efforts to explain how insurance works. It is key to ensure that insurers have access to and can make use of data to the benefit of customers.

Insurance Europe’s mission continues to be to promote the value of insurance and to increase policymakers’ understanding of how it works so that regulatory solutions are found that work for insurance customers and their providers, as well as for the economies and societies of Europe. We look forward to continuing our engagement with the EU institutions in the new mandate and stand ready to provide the sector’s expertise and views.