Europe is currently engaged in the preparation of the application measures of the Solvency II Directive  :
The work recently carried out by CEIOPS on behalf of the European Commission leads to a significant shift in the capital requirement (in the region of 40%) compared to the other simulations that took place shortly before the vote of the European Parliament and the agreement of the Council.

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This shift is possible only because the scientific foundation of the requirements is extremely fragile, if not non-existent, in certain areas.
Did the decision-makers Members of European parliament, European commission, CEIOPS etc … really fully understand what they were choosing and voting for in the name of modernity, given that they did not have a clear explanation of the foundations of these prudential regulations?
Whilst the validity of the search for better control over risks cannot be disputed, there are grounds to fear that the accumulation of mathematical formulae has only served to further blur the issue, rather than to clarify it.

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On the whole, in its current form Solvency II will be counter-productive and harmful, given the incentives it contains:

• It will be harmful to consumers because, for example,
  
  • It favours short-term guarantees,
    
  • It penalises the holding of assets, such as shares and property, by the insurers, even though this serves to protect policy-holders against inflation Bonds and equivalents might be a catastrophic investment in the current and future financial economic crisis context.
    
    
• Harmful to the stability of the economic system, since it favours the exteriorisation of margins and profits as quickly as possible, at the risk of creating cycles and false expectations regarding results
  
  
• Damaging to democracy, since its extreme complexity makes the results entirely dependent upon the values used for the parametering of the models and therefore it will be impossible to check if the company’s supervision , particularly that of the multinationals, has been correctly carried out. This will have two consequences: there is a risk, for the policyholders, of the company going bankrupt and an unlevel playing field between the insurers and the different countries.
  
  

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There is a need for a rapid reframing of these regulations, in the spirit of the current concerns of the majority of the governments, in order to bring about:

• A greater degree of simplicity to ensure a greater degree of real control,
  
• A wider political vision of the global role of insurance companies, so as to ensure a sustainable offer,
  
• A better understanding of the issues which are specific to risk insurance on the one hand and pension related activities on the other and also, long term/short term risks
  
  

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The elaboration of the level 2 and level 3 measures must provide the opportunity to move away from dogmatism, in order to impress upon the European Commission the urgent need to open up a more political debate on the current calibration phase so as to decide, in a frank and open manner, on reasonable measures that explicitly correspond to a specific economic burden before a necessary revision of the directive.

Michel Dupuydauby
President of ROAM
CEO of MACSF Group
Chief representative R.O.A.M.

Marie Hélène Kennedy
General Delegate of R.O.A.M.

Movie of FFSA seminar