Insurance Europe advocates for a fresh perspective on life and savings policies
In a recent response to the International Association of Insurance Supervisors (IAIS) consultation on structural shifts in the life insurance sector, Insurance Europe, the European insurance and reinsurance federation, has highlighted the evolving role of life insurers in the European market.
The consultation, which focuses on alternative assets and asset-intensive reinsurance (AIR), comes at a time when life insurers are grappling with the impact of regulatory requirements such as Solvency II and prolonged low interest rates, which have constrained their ability to offer cost-efficient products.
Insurance Europe underscores the central role life insurers play in providing long-term savings and retirement products in Europe. In response to challenging market conditions, life insurers have increased allocations to alternative assets and have adopted AIR transactions more frequently. These strategies aim to diversify investment portfolios and potentially improve long-term outcomes for policyholders.
AIR arrangements are subject to thorough due diligence and risk assessment procedures, forming part of broader efforts to manage long-term liabilities and enhance capital efficiency. Insurance Europe argues that the current Insurance Core Principles (ICPs) adequately provide the regulatory foundation for supervising both alternative assets and AIR, suggesting no major overhaul of standards is needed.
However, the association calls for clarifying definitions, particularly providing a more precise definition of AIR to promote supervisory consistency across jurisdictions. Insurance Europe also recommends that IAIS engage industry stakeholders earlier in the policy development process through technical workshops and expert dialogues to ensure any regulatory measures remain aligned with market practices and operational realities.
The response highlights the insurance sector’s extensive experience in managing complex risks, including those related to valuation and data constraints identified by IAIS. This demonstrates that existing risk management practices remain relevant and effective.
Moreover, Insurance Europe sees no need for changes in the ICPs regarding alternative assets and AIR but supports targeted clarifications and a more precise definition of AIR. The association also calls for early engagement with trade associations in regulatory processes to ensure practical, market-aligned outcomes.
The use of alternative assets and AIR by life insurers not only enhances portfolio diversification but also boosts returns and improves the long-term policy value for consumers. These investments are essential for the sector's continued ability to meet the long-term savings needs of European consumers.
In conclusion, Insurance Europe’s position reflects a view that while the life insurance sector is evolving, current supervisory frameworks and risk management tools are still fit for purpose but would benefit from more precise definitions and early stakeholder involvement to maintain regulatory effectiveness.
Events such as the consultation on structural shifts in the life insurance sector, which focuses on alternative assets and asset-intensive reinsurance, provide opportunities for the finance business and reinsurance industry to discuss and adapt to changing market conditions. In response, the European insurance and reinsurance federation, Insurance Europe, has advocated for greater clarity in definitions and earlier engagement with industry stakeholders in policy developments, emphasizing the need to maintain regulatory effectiveness while enhancing long-term outcomes for consumers.
