On 12 July 2019, the European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper Proposals for Solvency II 2020 Review Harmonisation of National Insurance Guarantee Schemes.
EIOPA is of the view that every EU Member State should have a national insurance guarantee scheme (IGS) in place for the protection of policyholders in the event of insurance failures. Schemes should be subject to minimum harmonisation in terms of common approach to the objectives of recovery and resolution to ensure consistency of policyholder protection and financial stability across Member States. Differences in national schemes currently mean that policyholders receive different levels of protection when an insurer goes into liquidation. Guarantee schemes in other sectors of the financial system have been harmonised at the EU level, for example in banking and investment.
EIOPA sets out its draft recommendations on the minimum set of harmonised features for national IGSs. These include the following:
- geographical coverage: geographical coverage of national IGSs should be harmonised on the basis of home-country principle;
- eligible policies: IGSs should cover specific life policies and specific non-life policies. The exact criteria of which needs to be carefully designed;
- eligible claimants: IGSs should cover natural persons and micro and small-sized legal entities. Further definitions of which are to follow;
- coverage level: the coverage level should be set so that it does not leave policyholders and beneficiaries exposed to considerable financial or social hardship, while bearing in mind the cost of funding of IGSs; and
- funding: Member States should ensure that IGSs have in place adequate systems to determine their potential liabilities. The available financial means of IGSs should be proportional to those liabilities.
The deadline for comments on the proposals is Friday 18 October 2019. This Consultation Paper is a draft response to the Call for Advice of the European Commission on the review of Directive 2009/138/EC2 (Solvency II).The advice will be amended in the light of this consultation and will be included in the Solvency II Opinion to be submitted by EIOPA to the European Commission by June 2020.