Insurance Sweden (Svensk Forsäkring), a lobby group whose members include many of the country’s biggest pension providers, has criticised the European Insurance and Occupational Pensions Authority’s (EIOPA) proposal for amendments to Solvency II, saying many of the changes will hit Swedish firms more than those of other member states.
The 2020 review of the Solvency II regulations is currently underway, with EIOPA having submitted its opinion to the European Commission, just before Christmas, proposing amendments.
Jonas Söderberg, economist at Insurance Sweden, said: “Many of EIOPA’s proposals may have greater consequences for Swedish insurance companies than for companies in other countries.”
This applies in particular to EIOPA’s proposal to change the design of the so-called symmetrical equity risk charge, he said, adding that “this is because Swedish companies have a larger proportion of equities than is usual in other countries.”
“This change could ultimately lead to Swedish companies reducing their shareholdings,” he warned, noting that Insurance Europe had drawn the Commission’s attention to these consequences.
Elsewhere in EIOPA’s proposed changes, the Swedish lobby group said the change being put forward to the risk-free interest rate used to value companies’ commitments might mean that the interest rate was reduced by around 20 basis points in Sweden.
In addition, a sensitivity analysis was being proposed, it said, where the interest rate was to be reduced by an additional 100 interest points in Sweden.
“We do not see any need for the change in the risk-free interest rate for the Swedish part,” Söderberg.
“In addition, EIOPA has not carried out an impact assessment for Swedish insurance companies, which is remarkable,” he said.
“EIOPA has not carried out an impact assessment for Swedish insurance companies, which is remarkable”
Jonas Söderberg, economist at Insurance Sweden
Meanwhile in Norway, consultancy Gabler said in an analysis of the effects of the proposals on pension funds (pensjonskasser) in the country that private pension funds would affect private funds more than public sector funds.
“The new capital requirement for interest rate risk can significantly reduce solvency capital adequacy coverage for private pension funds, while the effect on most pension funds with public sector occupational pensions is marginal,” said Egil Heilund, group director of the firm’s actuarial and risk management department.
He described the significant strengthening of the capital requirement for interest rate risk as the most important change in EIOPA’s proposal.
Changes in the Solvency II regulations affect pension funds in Norway, he said, which have to comply with new requirements in their long-term capital assessments.
He said that a weakness with the new model, seen through Norwegian eyes, was that the parameters for the capital requirements were calibrated against the history of Euro bond yields.
“A calibration against Norwegian interest-rate history would have resulted in somewhat weaker parameter setting and consequently lower capital requirements,” he said.
This argument has been incorporated into the consultation process via financial lobby group Finans Norge, he said, through the European umbrella organisation Insurance Europe, but had not so far been heeded in the design of the new model.