German ministry warned against Solvency II
GERMANY - A German ministerial committee has reiterated pension associations' fears by arguing the introduction of Solvency II for the insurance sector could be detrimental to the financial system.
The committee noted in a letter to the ministry: "The advisory committee for science at the federal economy ministry recommends Solvency II not be extended to the insurance sector - the federal government should push for an amendment of the regulation."
It said arguments that an extension of Solvency II to insurances, and with it insurance-based pension vehicles, would not take into account the different nature of liabilities these vehicles have compared to banks. (See earlier IPE story: Crisis "confirms" Solvency II not for pensions - Bayer)
The committee - made up of financial and economic experts to advise the economy ministry - claimed focusing on a short-term "value at risk"-measure was not sensible for insurance companies as they have to ensure they can meet their long-term liabilities.
Furthermore, the body suggested unifying solvency requirements for banks and insurances would "increase the risk of a crash in the system".
As an example, the committee noted under similar solvency requirements insurers could no longer serve as buyers of long-term securities which banks might have to sell in difficult times.
The association of Germany company Pensionskassen, VFPK, restated its concern that the introduction of Solvency II for the insurance sector would "extremely narrow the investment possibilities" of Pensionskassen. (See earlier IPE article: German Pensionskassen give thumbs down to Solvency II)
"With the minimum requirements to risk management, the so-called MaRisk - published by the supervisory body in January - issued detailed measures for an effective risk management at insurance companies," explained Helmut Aden, member of the executive board at VFPK.
"A further set of risk management regulations is therefore not necessary, especially when it - like Solvency II - is not purposeful."
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