Solvency II reform falls short in making Europe more competitive, warn insurers

Insurance Europe cautions the EU's draft rules miss key political commitments, putting growth and billions in investment at risk

BRUSSELS; 5 September, 2025 - Insurance Europe has warned that the European Commission's draft Level 2 proposals for Solvency II do not reflect the level of ambition set by the co-legislators and the Commission's own political commitment to generate sustainable growth and competitiveness in the EU.

In its response to the Commission's consultation, the European insurance industry reiterated its strong support for a robust regulatory framework that protects policyholders and safeguards financial stability. However, the draft technical proposals do not match the political ambition in a number of areas and will fail to deliver on the EU political aspirations to enhance EU competitiveness and unlock urgently needed investment.

The industry's key concerns include:

• Failure to address artificial volatility: A miscalibration of the Volatility Adjustment (VA) risk correction and a new, conservative and untransparent model for long-term interest rates leave insurers' balance sheets overly sensitive to short-term market fluctuations.
• Missed opportunity to unlock trapped capital: Overly restrictive long-term equity proposals limit the sector's ability to free up capital for long-term investment. While the proposed improvements to the risk margin are welcome, it remains out of step with other global regimes, leaving EU companies at a competitive disadvantage internationally.
• Extra complexity and burden: Despite promised simplification, there are missed opportunities to make the extensive Solvency requirements more proportionate. The review will bring a raft of new additional requirements alongside significant new operational burdens.

Angus Scorgie, Head of Prudential Regulation at Insurance Europe, said: "After many years of discussion, now is the time for the Solvency II review to deliver on its promise: combining protection for policyholders and financial stability with growth and resilience for Europe's economy and less red tape for insurers.

The Commission's technical proposals do not live up to the ambitions of last year's political agreement on the changes needed. Without improvements to the draft proposals, the review will fall short on strengthening European insurers' contribution to the financing of the EU's priorities of competitiveness and growth."