EU insurance supervision taking shape, but significant challenges remain

The European Insurance and Occupational Pensions Authority (EIOPA) has made an important contribution to a common supervisory culture and financial stability in the insurance sector, according to a new report from the European Court of Auditors i. But a number of significant challenges still need to be addressed by the Authority itself, by national supervisors and by legislators, say the auditors. These include more robust oversight of cross-border insurance businesses, supervision of the internal models used by insurance companies and EIOPA’s own governance.

EIOPA was established in 2011 as part of the reform of supervision of financial markets after the crisis of 2007-2008. Its core responsibilities are to ensure high-quality, effective and consistent supervision of the pensions and insurance sector across the EU i. This is carried out together with national supervisors (National Competent Authorities) in order to ensure a uniform level of protection for insurance policyholders and taxpayers. Along with other European Supervisory Authorities (ESAs), its institutional framework and mandate are currently subject to a comprehensive review by the European Commission, the European Parliament and the Council.

The auditors assessed EIOPA’s actions to ensure convergence between national insurance supervisory systems in the EU between 2015 and 2017, the adequacy of its resources, and its governance. They also analysed the 2016 Europe-wide Insurance Stress Test, given its importance for identifying potential risks to financial stability in the insurance sector.

“European Supervisory Authorities are key to avoiding any failure in financial markets that could negatively affect the real economy and consumers’ well-being”, said Rimantas Šadžius, the Member of the European Court of Auditors responsible for the report. “It is therefore essential that the on-going review of legislation takes into account the lessons learnt from our scrutiny of EIOPA, in particular concerning the adequacy of its resources and its governance, and its co-operation with national authorities to ensure proper supervision of cross-border business”.