Changes from plenary report to adopted text

RemovedDRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

AddedP9_TA(2024)0295

Removedon the proposal for a directive of the European Parliament and of the Council amending Directive 2009/138/EC as regards proportionality, quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks, group and cross-border supervision

AddedAmendments to the Solvency II Directive

Removed(COM(2021)0581 – C90367/2021 – 2021/0295(COD))

AddedCommittee on Economic and Monetary Affairs

AddedPE732.668

AddedEuropean Parliament legislative resolution of 23 April 2024 on the proposal for a directive of the European Parliament and of the Council amending Directive 2009/138/EC as regards proportionality, quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks, group and cross-border supervision (COM(2021)0581 – C9-0367/2021 – 2021/0295(COD))

▸6 unchanged paragraphs

(Ordinary legislative procedure: first reading)

The European Parliament,

– having regard to the Commission proposal to Parliament and the Council (COM(2021)0581),

– having regard to Article 294(2) and Article 53(1), Article 62 and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90367/2021),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

– having regard to the opinion of the European Economic and Social Committee of 23 February 2022,

Added– having regard to the provisional agreement approved by the responsible committee under Rule 74(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 24 January 2024 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

▸5 unchanged paragraphs

– having regard to Rule 59 of its Rules of Procedure,

– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0256/2023),

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 1

RemovedAMENDMENTS BY THE EUROPEAN PARLIAMENT*

AddedP9_TC1-COD(2021)0295

Removedto the Commission proposal

AddedPosition of the European Parliament adopted at first reading on 23 April 2024 with a view to the adoption of Directive (EU) 2025/… of the European Parliament and of the Council amending Directive 2009/138/EC as regards proportionality, quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks and group and cross-border supervision, and amending Directives 2002/87/EC and 2013/34/EU

Removed---------------------------------------------------------

Added(As an agreement was reached between Parliament and Council, Parliament's position corresponds to the final legislative act, Directive (EU) 2025/2.)

Removed2021/0295 (COD)

RemovedProposal for a

RemovedDIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

Removedamending Directive 2009/138/EC as regards proportionality, quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks, group and cross-border supervision

Removed(Text with EEA relevance)

RemovedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

RemovedHaving regard to the Treaty on the Functioning of the European Union, and in particular Article 53(1), Article 62 and Article 114 thereof,

RemovedHaving regard to the proposal from the European Commission,

RemovedAfter transmission of the draft legislative act to the national parliaments,

RemovedHaving regard to the opinion of the European Economic and Social Committee,

RemovedActing in accordance with the ordinary legislative procedure,

RemovedWhereas:

Removed(1) Directive 2009/138/EC of the European Parliament and of the Council has created more risk-based and more harmonised prudential rules for the insurance and reinsurance sector. Some of the provisions of that Directive are subject to review clauses. The application of that Directive has substantially contributed to strengthening the financial system in the Union and rendered insurance and reinsurance undertakings more resilient to a variety of risks. Although very comprehensive, that Directive does not address all identified weaknesses affecting insurance and reinsurance undertakings.

Removed(2) The Covid-19 pandemic has caused tremendous socio-economic damage and left the EU economy in need of a sustainable, inclusive and fair recovery. Likewise, the economic and social consequences of Russia’s war against Ukraine are still unfolding. This has made the work on the Union’s political priorities even more urgent, in particular ensuring that the economy works for people and attaining the objectives of the European Green Deal. The insurance and reinsurance sector can provide private sources of financing to European businesses and can make the economy more resilient by supplying protection against a wide range of risks. With this dual role, the sector has a great potential to contribute to the achievement of the Union’s priorities.

Removed(3) As underlined in the Commission’s Communication of 24 September 2020 ‘A Capital Markets Union for people and businesses’, incentivising institutional investors, in particular insurers, to make more long-term investments will be instrumental in supporting re-equitisation in the corporate sector. To facilitate insurers’ contribution to the financing of the economic recovery of the Union, the prudential framework should be adjusted to better take into account the long-term nature of the insurance business. In particular, when calculating the Solvency Capital Requirement under the standard formula, the possibility to use a more favourable standard parameter for equity investments which are held with a long-term perspective should be facilitated, provided that insurance and reinsurance undertakings comply with sound and robust criteria, that preserve policyholder protection and financial stability. Such criteria should aim to ensure that insurance and reinsurance undertakings are able to avoid forced selling of equities intended to be held for the long term, including under stressed market conditions. As insurance and reinsurance undertakings have a wide variety of risk-management tools to avoid such forced selling, those criteria should recognise such variety and not require the legal or contractual ring-fencing of long-term investment assets in order for insurance and reinsurance undertakings to benefit from the more favourable standard parameter for equity investments. Finally, the insurance or reinsurance undertaking’s management should commit to a minimum holding period of the equities through written policies and demonstrate its ability to maintain this portfolio over that holding period, rather than being compelled to invest for the said holding period, which is not prudent.

Removed(3a) Adjustments that better take into account the long-term nature of the insurance business might lead to an increase in free available capital as a result of the reduction in the Solvency Capital Requirement. Where this is the case, insurance and reinsurance undertakings should consider not to direct freed-up capital towards shareholder distributions or management bonuses, but should strive to direct the freed-up capital towards productive investments in the real economy in order to support the economic recovery and the Union’s broader policy objectives.

Removed(3b) Insurers and reinsurers have the freedom to invest anywhere in the world, and are not limited to the Union. Investments in third countries may also be conducive to general development aid policies of the Union or Member States. Therefore, insurance and reinsurance undertakings should ensure that their investment policy reflects the objectives of the up-to-date EU list of non-cooperative jurisdictions for tax purposes and of Directive 2015/849 of the European Parliament and of the Council in respect of high-risk third countries.

Removed(4) In its Communication of 11 December 2019 on the European Green Deal, the Commission made a commitment to integrate better into the Union’s prudential framework the management of climate and environmental risks. The European Green Deal is the Union’s new growth strategy, which aims to transform the Union into a modern, resource-efficient and competitive economy with no net emissions of greenhouse gases by 2050. It will contribute to the objective of building an economy that works for the people, strengthening the Union’s social market economy, helping to ensure that it is future-ready and that it delivers stability, jobs, growth and investment. In its proposal of 4 March 2020 for a European Climate Law, the Commission proposed to make the objective of climate neutrality and climate resilience by 2050 binding in the Union. That proposal was adopted by the European Parliament and by the Council and it entered into force on 29 July 2021. The Commission’s ambition to ensure global leadership by the EU on the path towards 2050 was reiterated in the 2021 Strategic Foresight Report, which identifies the building of resilient and future-proof economic and financial systems as a strategic area of action.

Removed(5) The EU sustainable finance framework will play a key role in meeting the targets of the European Green Deal and environmental regulation should be complemented by a sustainable finance framework which channels finance to investments that reduce exposure to these climate and environmental risks. In its Communication of 6 July 2021 on a Strategy for Financing the Transition to a Sustainable Economy, the Commission committed to propose amendments to Directive 2009/138/EC to consistently integrate sustainability risks in risk management of insurers by requiring climate change scenario analysis by insurers.

Removed(5a) Numerous legislative acts have recently been proposed and adopted to improve resilience and contribution to sustainability, in particular in relation to sustainability reporting, including Regulation (EU) 2019/2088 of the European Parliament and of the Council, a directive amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting, and a directive on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937, which all affect the insurance and reinsurance sector.

Removed(5b) The further integration of the single market for insurance is a key objective of this amending Directive. The integration of the EU single market for insurance increases competition and the availability of insurance products across Member States to the benefit of businesses and consumers. Insurance failures in the single market for insurance since the application of Solvency II emphasise the need for more consistency and convergence of supervision across the Union. The supervision of insurance and reinsurance undertakings operating under the freedom to provide services and the freedom of establishment should be further improved without undermining the objective of further integrating the single market for insurance to ensure consistent consumer protection and safeguarding fair competition across the single market.

Removed(6) Directive 2009/138/EC excludes certain undertakings from its scope, due to their size. Following the first years of application of Directive 2009/138/EC and with a view to ensuring that it does not unduly apply to undertakings of reduced size, it is appropriate to review those exclusions by increasing those thresholds, so that more small insurance undertakings that fulfil certain conditions are not subject to that Directive. However, undertakings benefitting from such increased thresholds should have the option to keep or seek authorisation under Directive 2009/138/EC in order to benefit from the single license provided therein.

Removed(7) Directive 2009/138/EC does not apply to an assistance activity where the conditions of Article 6(1) of that Directive are fulfilled. The first condition states that the assistance is to be related to accidents or breakdowns involving a road vehicle which occurs in the territory of the Member State of the undertaking providing cover. That provision could mean a requirement of authorisation as insurer for providers of assistance of road vehicles in the event of an accident or breakdown that occurs just across the border and may unduly disrupt assistance. For this reason, it is appropriate to review that condition. Therefore, the condition under Article 6(1), point (a), of Directive 2009/138/EC should be also extended to accidents or breakdowns, involving the road vehicle covered by that undertaking, that occur occasionally in a neighbouring country.

Removed(8) Insurance and reinsurance undertakings can submit an application for authorisation in any Member State. Information on previous applications and the outcomes of the assessment of such applications could provide essential information for the assessment of their application. Therefore, the supervisory authority should be informed by the applicant insurance or reinsurance undertaking about previous rejections or withdrawals of authorisation in another Member State.

Removed(9) Prior to the granting of authorisation, the supervisory authority of the home Member State should consult the supervisory authorities of any Member States concerned. In view of increased cross-border insurance activities, it is necessary to enhance the convergent application of Union law in cases of cross-border insurance activity and the exchange of information between the supervisory authorities, in particular before authorisations are granted. Therefore, where several supervisory authorities need to be consulted, any supervisory authority concerned should be allowed to request a joint assessment of an application for authorisation from the supervisory authority of the Member State where the authorisation process is ongoing.

Removed(10) Directive 2009/138/EC should be applied in accordance with the proportionality principle. To facilitate the proportionate application of the Directive to undertakings presenting a lower risk profile than the average undertaking, and to ensure that they are not subject to disproportionately burdensome requirements, it is necessary to provide risk-based criteria that allow for their identification.

Removed(11) Undertakings complying with the risk-based criteria should be able to be classified as low-risk profile undertakings pursuant to a simple notification process. Where, within one month after such notification, the supervisory authority does not oppose the classification for duly justified reasons linked to the assessment of the relevant criteria, that undertaking should be deemed as low-risk profile undertaking. Once classified as a low-risk profile undertaking, in principle, it should automatically benefit from identified proportionality measures on reporting, governance, revision of written policies, own-risk solvency assessment and disclosure requirements.

Removed(12) It is appropriate that proportionality measures are available also to undertakings that are not classified as low-risk profile undertakings, but for which some of the requirements of Directive 2009/138/EC are too costly and complex, in view of the risks involved in the business carried out by such undertakings. Those undertakings should be permitted to use proportionality measures based on a case-by-case analysis and following prior approval by their supervisory authorities.

Removed(13) A proper implementation of the proportionality principle is crucial to avoiding excessive burden on insurance and reinsurance undertakings. Supervisory authorities need to be regularly informed of the use of proportionality measures. For this reason, insurance and reinsurance undertakings should annually report to their supervisory authorities information on the proportionality measures they use.

Removed(14) Captive insurance undertakings and captive reinsurance undertakings which only cover risks associated with the industrial or commercial group to which they belong, present a particular and generally lower risk profile that should be taken into account when defining some requirements, in particular on own-risk and solvency assessment, disclosures and the related empowerments for the Commission to further specify the rules on such empowerments. Therefore, captive insurance undertakings and captive reinsurance undertakings should▌ benefit from the proportionality measures by being automatically classified as low-risk profile undertakings.

Removed(15) It is important that insurance and reinsurance undertakings maintain a healthy financial position. For that purpose, Directive 2009/138/EC provides for financial supervision with respect to an undertaking’s state of solvency, the establishment of technical provisions, its assets and its eligible own funds. However, the system of governance of an undertaking is also an important factor in ensuring that the undertaking maintains its financial health. To that end, supervisory authorities should be required to carry out regular reviews and evaluations of the system of governance as part of their financial supervision of insurance and reinsurance undertakings.

Removed(16) Cooperation between the supervisory authority of the home Member State that granted authorisation to an insurance or reinsurance undertaking and the supervisory authorities of the Member States where that undertaking pursues activities by establishing branches or by providing services, should be strengthened in order to better prevent potential problems affecting consumer rights and to enhance the protection of policyholders across the Union. This cooperation should increase transparency and the regular exchange of information between concerned supervisory authorities and include more information coming from the supervisory authority of the home Member State, in particular regarding the outcome of the supervisory review process related to the cross-border activity, the financial condition of the undertaking, and market conditions which might impact the provision of services.

Removed(17) Supervisory authorities should be entitled to receive from each supervised insurance and reinsurance undertaking and their groups, at least every three years, a regular narrative report with information on the business and performance, system of governance, risk profile, capital management and other relevant information for solvency purposes. In order to simplify this reporting requirement for insurance and reinsurance groups, it should be possible, subject to certain conditions, to submit the information of the regular supervisory report relating to the group and its subsidiaries in an aggregated way for the whole group.

Removed(18) It should be ensured that low-risk profile undertakings are prioritised when supervisors grant exemptions and limitations to reporting. For this type of entities, the process of notification that applies for the classification as low-risk profile undertakings should ensure that there is enough certainty as regards the use of exemptions and limitations to reporting.