St. Petersburg, 27-29 2005

Challenges for the insurance industry facing the complex regulatory system

Aglika Sabeva, LL.M.

International Affairs

Comité Européen des Assurances (CEA)

ARIA Conference

St. Petersburg, 27-29 May 2005

St. Petersburg, 27-29 2005

Outline

I. Reminder on CEA

II. The changing regulatory & supervisory environment

III. CEA’s current overall priorities

IV. Better regulation for insurers

St. Petersburg, 27-29 2005

CEA, the "pan-European" insurance federationRepresenting 32 national insurance & reinsurance associations

BulgariaCroatia

2 associate members

30 full members

25 EU Member States+

5 Other Markets

IcelandLiechtenstein

NorwaySwitzerland

Turkey

RussiaAISAM (mutual insurers)

2 observers

St. Petersburg, 27-29 2005

European Insurance in Figures

2004 Data CEA (32 markets) EU-25

Total premium income (bn EUR) 926 (bn EUR) 875

Investments (bn EUR) 5823 (bn EUR) 5460

Number of companies 5024 4809 (2003)

Number of employees 1 015 903 974 549 (2003)

Non-Life40,4%

Life59,6 %

2004 Premium

Breakdown per Class

0

100

200

300

400

500

600

700

800

900

1.000

1993 1994 1995 1996 1997 1998 1999 2000 20012002 2003

-2

0

2

4

6

8

10

12

14

Total premium (EUR bn)Growth rate (%)

St. Petersburg, 27-29 2005

Share life and non-life premium in 2004: Two “Extreme” markets compared

Non-Life95 %

Life5 %

Latvia

Breakdown per Class

Non-Life21,3 %

Life78,7 %

Finland

Breakdown per Class

St. Petersburg, 27-29 2005

Outline

I. Reminder on CEA

II. The changing regulatory & supervisory environment

III. CEA’s current overall priorities

IV. Better regulation for insurers

St. Petersburg, 27-29 2005

Number of insurance-related areas affected by EU legislation since 1990 (as of March 2005)

8

5

8

4

7

3

3

9

5

3

4

5

4

10

0 2 4 6 8 10 12

Single Market

Financial Services

Prudential Regulation

Pensions

Motor

Health

Agriculture

Consumer Protection

Company Law

Applicable Law

Distribution

Liability

Property

Others

St. Petersburg, 27-29 2005

Increasing number of procedures to follow

The new Comitology (or Lamfalussy) procedure

• Main principles designed by EU institutions (level 1)

• Technical details dealt with:

- EIOPC: European Insurance and Occupational Pensions Committee (level 2)

- CEOIPS: Committee of European Insurance and Occupational Pensions Supervisors (level 3)

St. Petersburg, 27-29 2005

The internationalisation of insurance regulation

• Role of international organisations increasingly affects the European regulatory landscape

• For example, two actors influencing the Solvency II debate:– IAIS - International Association of Insurance Supervisors– IASB - International Accounting Standards Board

St. Petersburg, 27-29 2005

May 2004 EU enlargement: Relative weight of the ten new Member States (since 1/11/04)

22.1%EP

26,2%EU

Council

40%European

Commission

Before After

1.8%Premium

EU

St. Petersburg, 27-29 2005

European insurance regulation: a chaotic building site?

• Absence of central leadership

• Staff changes within EU institutions

• Many uncoordinated “sub”- sites

• Industry consultation often unsatisfactory

• Many options for Member States in implementation of directives

• Implementation by Member States delayed

St. Petersburg, 27-29 2005

Outline

I. Reminder on CEA

II. The changing regulatory & supervisory environment

III. CEA’s current overall priorities

IV. Better regulation for insurers

St. Petersburg, 27-29 2005

CEA’s current overall priority issues

Financial Reporting

Solvency II

Guarantee Schemes

Post FSAP

Pensions

Taxation

Insurabilityof new risks

St. Petersburg, 27-29 2005

Outline

I. Reminder on CEA

II. The changing regulatory & supervisory environment

III. CEA’s current overall priorities

IV. Better regulation for insurers

St. Petersburg, 27-29 2005

EU regulation impacts the value drivers of insurance business

EU regulations

Premium revenues

Investment income

Operational costsCost of capital

St. Petersburg, 27-29 2005

Premium income is influenced by a number of regulations to be implemented

PremiumPremiumProduct liability project

Gender equality directive

Environmental liability directive

Feed hygiene regulation

Occupational pensions directive

St. Petersburg, 27-29 2005

Consumer protection rules often increase costs for insurance operators

Operational costsOperational costsDistance marketing directive

E-commerce directive

Investment services directive

Consumer credit directive

Insurance mediation directive

St. Petersburg, 27-29 2005

Insurance operators’ investments are also regulated by the EU

Investment incomeInvestment incomeHedge

funding (EP report)

3rd non-life insurance directive

UCITS directive

3rd life insurance directive

St. Petersburg, 27-29 2005

A number of ongoing projects have a potential impact on the cost of capital

Cost of capitalCost of capital

Solvency II directive

IAS/IFRS project

Reinsurance directive

Transparency directive

Guarantee schemes working paper

St. Petersburg, 27-29 2005

Better regulation for insurers is needed to fulfil their role in society

• A window of opportunity

• the right message at the right moment and to the right person

• adapt to new structures

• enhance coordination of insurers’

St. Petersburg, 27-29 2005

CEA Publications (1)

Can be ordered fromthe CEA home pagewww.cea.assur.org

Available for free onthe CEA home pagewww.cea.assur.org

St. Petersburg, 27-29 2005

CEA Publications (2)

Available for free on the CEA home pagewww.cea.assur.org

St. Petersburg, 27-29 2005

www.cea.assur.org