Nathalie BERGER
Head of Unit Insurance and Pensions Directorate General for Financial Stability
Financial Services and Capital Markets Union (FISMA)
European Commission

XPRIMM: What are the main obstacles still remaining from creating a single market for financial services in Europe?
Nathalie BERGER:
Despite significant progress in recent decades to develop a single market for capital, there are still many long-standing and deep-rooted obstacles that stand in the way of cross-border investments, which deter investors from diversifying their portfolios geographically. These obstacles have their origins in national law - insolvency, collateral and securities law, as well as market infrastructure and tax barriers.

There is evidence that tax barriers continue to hinder cross-border investment. Withholding tax procedures are considered as a major barrier to cross-border investment. Double taxation agreements concluded between states should normally allow investors directly or indirectly investing (among others) through investment funds to avoid double taxation, either by getting relief at source or by benefiting from full or partial refund. Total cost of withholding tax refund processes is estimated at € 8.4 billion per year.

Divergences in supervisory outcomes lead to cross-border spill-overs and unjustified differences in the supervision of the same risk. Deeper financial integration will need to be accompanied by increased convergence of supervisory outcomes across the EU and necessary adjustments to strengthen the supervisory framework in order to ensure that the capacity to supervise and manage risks keeps pace, in particular in cross-border and critical areas.

XPRIMM: EU Member States are currently in the process of transposition of the Insurance Distribution Directive. How is this process developing? What feedback have you received so far?
All Member States are currently proceeding with the transposition of the directive into national law. We are assisting them in this endeavour and have organised two transposition workshops to this effect. We are confident that the vast majority of Member States will be able to meet the transposition deadline of 23 February 2018.

XPRIMM: What benefits and what challenges brings the Insurance Distribution Directive in terms of product information and conflict of interest management?
The Insurance Distribution Directive (IDD) improves the standards for product information to be given to consumers before they sign an insurance contract. The newly created Insurance Product Information Document (IPID) will provide consumers with basic information on the main features of proposed non-life insurance contracts, allowing them to easier understand and compare the products on offer. For life insurance products and insurance-based investment products, insurance distributors are already obliged under the PRIIPs Regulation and the Solvency II Directive to provide comparable information documents.

As for conflict of interest management, IDD provides specific rules for identifying, preventing and managing conflicts of interest in the distribution of insurance-based investment products. These new rules are largely aligned to the standards applicable to the sale of regular investment products under MiFID II, ensuring a level playing field for sellers and guaranteeing consumer the same high standard of protection in all sales of investment products. In addition, the Directives provides rules requiring insurance distributors to make disclosures about their remuneration, on which basis advice is given (in particular whether they are limited to selling products from one specific provider) and on possible influences from companies belonging to the same group. Insurance distributors are also obliged to avoid conflicts of interest in the remuneration or incentivisation of their employees.

XPRIMM: The General Data Protection Regulation is due to come into force in May 2018 but already there are many discussions relating to the costs of its implementation. What is your comment on that and, also, could you please elaborate on the main benefits for European consumers that the GDPR is offering?
The data protection reform package helps the Digital Single Market realise the potential through (for instance): One continent, one law: a single, pan-European law for data protection, replacing the current inconsistent patchwork of national laws. Companies will deal with one law, not 28. The benefits are estimated at €2.3 billion per year; One-stop-shop: a 'one-stop-shop' for businesses: companies will only have to deal with one single supervisory authority, not 28, making it simpler and cheaper for companies to do business in the EU.

For businesses, this reform provides clarity and consistency of the rules to be applied, and restores trust of the consumer, thus allowing undertakings to seize fully the opportunities in the Digital Single Market. In the case of citizens, the reform provides tools for gaining control of one's personal data, the protection of which is a fundamental right in the European Union. The data protection reform will strengthen citizens' rights and build trust.

XPRIMM: The European Commission has launched a Public consultation on the operations of the European Supervisory Authorities. What is the purpose of this exercise? Are we about to see changes in the financial supervision framework in Europe?
The consultation is an opportunity for all stakeholders to provide their views on what possible changes may be needed to the current rules governing the ESAs so that they can operate more effectively and deliver on their tasks and objectives in full.

Our aim now is to identify areas where the effectiveness and efficiency of the ESAs can be strengthened and improved. A general review of the ESAs was foreseen for this year, and mandated by their founding Regulations.

The consultation focuses on these key areas such as (1) tasks and powers; (2) governance;(3) supervisory architecture; and (4) funding. We are focusing on optimising ESAs' powers in the following 8 areas, as follows: work on supervisory convergence; non-binding measures such as guidelines and Q&As; work on consumer and investor protection; enforcement powers; international aspects of ESAs work; access to data; powers in relation to reporting and financial reporting.

In terms of future steps to be taken, we will have to wait for the feedback to the public consultation before proceeding but we will have to do an evaluation before we decide on the next steps.

XPRIMM: One of the main risks for the insurance industry is the very low interest rates environment. How are you dealing with this at EU level?
Low interest rates are currently of highest concerns for (re)insurers. The perception of the interest rate related risks worsened from the beginning of 2016. EIOPA conducted a stress test in last year to assess the insurance sector's vulnerabilities to a combination of market risk adverse scenarios. It was based on a sample of solo insurance undertakings most vulnerable in a persistent low interest rate environment and a double hit scenario where, in addition to the low interest rates, the assets prices are also stressed. ​​

In fact, stress tests represent one of the regular supervisory tools that help to assess the resilience of the insurance sector to potential adverse market developments and to extract valid conclusions to support the stability of the financial system.

In order to ensure coordinated supervisory actions, following the 2016 stress test, EIOPA issued recommendations to national supervisors, inter alia: - to ensure that undertakings align their internal risk management processes to the external risks faced; - to review the clauses of the guarantees, their typologies, and the optionalities they carry to assess if the valuation of the technical provisions can be considered proportionate and prudent; and - to request a reduction in the maximum guarantees or in unsustainable profit participations offered in new business etc.

XPRIMM: What will be the benefits of the Pan-European Personal Pensions product project for EU citizens?
The forthcoming PEPP initiative will contribute to further develop EU capital markets towards sufficiently deep, liquid and efficient markets, benefitting investment and growth in the EU. A well-functioning internal market for personal pensions could contribute significantly to provide consumers with adequate choice of personal pension products with minimum EU quality standards protecting consumers and to provide them with adequate market access across the European Union.

Consumers, all over the EU, will benefit from the specific advantages of a PEPP, including when exercising their mobility (single market with standardisation, cross-border and CMU completion, and enhanced features for consumer protection). Also, a larger market provides more and better opportunities for consumers to save for retirement, with better returns and better products. It also means more and better opportunities to save for retirement across borders for mobile consumers and allows for additional opportunities to save for retirement for employees usually not covered by the regular state or occupational pension provision.

XPRIMM: There are public discussions regarding the role that Solvency II Directive played in connection with the Mergers & Acquisitions market for insurance undertakings. Also, there are local insurers that complained about the impact of this regulatory framework. Could you please comment on that?
We have no reliable information on the effect of Solvency II on M&A activity. As already announced, we will review the Solvency II Directive in 2020.

XPRIMM: Can you comment upon the Romanian Government decision regarding the MTPL tariffs cap?
In November 2016, the Romanian Government introduced a premium cap for MTPL insurance. This cap is in principle valid for 6 months (until 18 May 2017), but can theoretically be extended by the Government for subsequent periods of 3 months. We consider that this premium cap has a negative impact on the free competition in the Romanian motor insurance sector and puts significant pressure on the business activity of insurance undertakings concerned.

It may also have a negative impact on the quality of insurance services provided to consumers. This price regulation in the MTPL insurance sector raises serious concerns for us as to its compatibility with the Solvency II Directive (especially Articles 21 and 181), as well as with the case-law of the EU Court of Justice (in particular the decision in case C-59/01).

Solvency II prohibits a prior approval or a notification obligation of premiums and, following the court's interpretation, also direct price regulation, unless a general price-control system exists in a Member State. As a general price-control system is not in place in Romania - we expect that the premium cap not be extended upon the expiry of the current measures on 18 May 2017. We will monitor the developments closely and take the necessary decisions, in order to ensure full compliance with EU law.

XPRIMM: What consequences will Brexit have on the European Insurance market, in your opinion?
We very much regret the UK's decision to withdraw from the European Union. And, as soon as the UK is ready, we shall start negotiating in a constructive manner. Given that both sides have less than two years to close a deal, we are advising firms to prepare for the UK's withdrawal from the EU as of now.

XPRIMM: Thank you!

Related articles


Cornel COCA CONSTANTINESCUVice-PresidentASF - the Financial Supervisory Authority, Romania

The Romanian insurance market went through a rough period, marked by several changes in legislation, especially on the MTPL segment, a field of business which is now, for the time time, regulated by a dedicated law. Although still contested in some aspects, the new Law sets up the premises for a better predictability, fair pricing ane better consumer protection.


Andrea KEENANSenior Managing Director - Industry Relations, A.M.Best USAVice Chair, Microinsurance Network

Microinsurance helps with financial education, family planning, development of small enterprises and maintenance of health, and the products are typically designed to address the specific needs of any given population.  A virtuous cycle develops as this produces income smoothing, larger planning horizons and the development of financial wellbeing.  It is challenging because, to be affordable, scale must be achieved.


Nicola RAUTMANNMarket Executive Austria & CEE, Swiss ReChristian ENGELNMarket Head Russia & CIS, Swiss Re

We currently expect the immediate impact of digitalization to be on sales, with an increased ability to reach clients and offer cross-selling of products.  Data could be pre-filled, which is likely to increase sales conversions. The full benefits of digitalization however will depend on the extent to which data owners are able to make use of their data, including sharing it with other parties.


Oleg HANIN, Chairman of the Board, KOMMESK-OMIR

One of the most discussed subjects in our market, in 2016 was the transfer of the road accident claims settlement activity from the independent evaluators to the insurance companies. Despite the surge in negative expectations, the measure resulted in an effective direct, non-intermediated interaction between insurers and their clients which led to the growing customer satisfaction with regard to the claims payment. In KOMMESK-OMIR case, in 2016, the level of satisfaction with the claims payments reached to 91%, while the quality of the settlement of losses was 90%.


Dr. Vahan AVETISYANExecutive Director of the Armenian MIB

We applied for membership to the Green Card international insurance system in the beginning of 2016 and are currently working in this direction. We have not yet summarized the results of the analysis of Green Card contracts' tariffs, but I do not see any bases for significant change.


NATIONAL BANK OF SERBIAInsurance Supervision Department

There is a lot of catchup potential of the Serbian insurance market, having in mind the level of its development compared the EU average. We can expect to see a continuation of positive premium developments coupled by a healthy increase of technical provisions. This should translate into sufficient capital adequacy and a continuation of positive trends in profitability, provided that cost pressures are kept in check.


Vyacheslav CHERNYAKHOVSKYChairman of the CommitteeUkrainian Society of Financial Analysts

There is a tendency to withdraw from insurance business, both on the foreign investors side and on domestic owned companies. In case of the national companies the trend  is more connected with obvious or provoked bankruptcies, while for foreign investors turning off Ukrainian business was caused by the high level of sovereign risk, low rates of economic recovery, insignificant (or even negative) return on capital, etc.


Fadi AbuNahlGroup Chief Executive Officer & DirectorTRUST Re

Slowing economic growth, continued pressure on pricing, emerging risks (e.g. Cyber hacking) and regulatory changes such as Solvency II in Europe, C-ROSS in China, IRDA in India, and new South African regulations are some of the main challenges we face. Understanding the challenges of reinsurance activity in the CEE also means understanding what stakeholders perceive, what they want, and meeting these expectations. 


Emmanuil MKRTCHYANGeneral DirectorArmInfo News Agency

The supervisory authority pays attention to the process of automation, digitizing, the creation of databases and on-line services in order to improve the quality of customer service and, last but not least the reduction of the level of fraud not only among unscrupulous customers, but also in the case of insurance agents. A similar database has already been created for the MTPL segment and it will be useful for insurers to promote the voluntary types of insurance.


Ervin KOCIExecutive General DirectorAlbanian FSA

We expect that 2017 will be a better year towards the performance and expansion of the insurance market, the increasing of transparency and trust of the consumers, the fostering and diversification of insurance products, as well as towards the strengthening of inter-institutional cooperation, to promote exchange of experiences in terms of the regulation and stabilization of the market.




61st "Rendez-Vous de Septembre" ends today in Monte Carlo: review

The 61st edition of the "Rendez-Vous de Septembre", the annual traditional meeting of reinsurers ends today in Monte Carlo. The Nat Cat insurance protection gap, as well as the global insurance market readiness to deal with the increasing complexity of the cyber risks were among the most debated topics.



MONTE CARLO: Live news from the "Rendez-Vous de Septembre"

The 61st edition of the "Rendez-Vous de Septembre", the annual traditional meeting of reinsurers has started yesterday in Monte Carlo. XPRIMM publications on the CEE, SEE and CIS insurance markets are available at the XPRIMM stand in Fairmont Hotel as well as at the other event's venues.


See all