Denmark’s pensions and insurance industry association has hit out at new proposals from the European Insurance and Occupational Pensions Authority (EIOPA), saying they go too far, and arguing they would make up to DKK35bn (€4.7bn) of green investments impossible.
Insurance & Pension Denmark (IPD) said in a statement that EIOPA’s proposals in the EU’s Solvency II regulation review would require pension and insurance companies to tie up as much as DKK10bn of extra capital.
Kent Damsgaard, chief executive officer of IPD, said: “According to our estimates, the proposal may limit the industry’s investments in, for example, companies and offshore wind farms by between DKK25bn and DKK35bn.”
Most of Denmark’s pension providers are incorporated as life insurance companies and subject to the Solvency II regime.
“The result is less growth and fewer jobs, and Danish politicians must be aware of this,” Damsgaard said.
The European solvency rules, which came into force back in 2016, are now being reviewed, and EIOPA has sent its advice on changes to be made to the framework to the European Commission.
Damsgaard said it certainly made sense to have common rules that ensured companies were solvent, so insurance and pension customers could be safe, but IPD said it disagreed with EIOPA’s statement that its proposal would be financially neutral.
“If you tighten too much and force companies to hold more capital than necessary, it will eventually become more expensive for the Danes. We believe that the proposal goes too far,” the CEO said.
In addition to a decrease in investments, IPD said EIOPA’s proposal would also mean a smaller return for pension savers, and therefore also reduced tax revenues for the Danish state from the PAL pensions returns tax.
Industry association Insurance Europe has also criticised EIOPA’s proposals, describing them as a missed opportunity to address existing flaws in the framework in a way that supported the EU’s objectives set out in the Green Deal and the Capital Markets Union.
Publishing a position paper on its view of the advice from EIOPA, the Brussels-based lobby group said: “It could decrease the risk-taking capacity of EU insurers by around €60bn and would significantly reduce insurers’ ability to invest in the real economy.”
Insurance Europe said that if the EU implemented EIOPA’s proposals, they would further amplify Solvency II’s conservativeness and measurement flaws, preventing the industry from fully supporting the EU’s recovery, investment and sustainability goals.
“None of these consequences are justified, as there is no evidence that the industry needs more capital, nor that the framework needs more layers of prudency, on top of the long list of those that already exist,” the group said.