Regulation With The Consumer in Focus

Danish consumers must be able to rely on their pension savings being invested in a responsible manner so that consumers upon retirement get what their pension projections have indicated. It is therefore important that the insurance and pension industry have the funds necessary to withstand financial crises and setbacks while still being able to meet their obligations.


Danish insurance companies and pension funds are regulated by the Solvency II directive, which was introduced in 2016. The solvency level in Denmark is one of the highest in Europe. This entails a high degree of consumer protection.


The right balance between solvency requirements and growth

It is important to strike the right balance between, on the one hand, securing a high level of solvency and, on the other hand, giving the insurance and pension industry freedom to invest the pension savers money in a way that gives the highest rate of return possible. If solvency requirements are strengthened further, it could have consequences for the industry’s ability to invest in sustainable transition, infrastructure and growth creating projects.


Solvency II 2020-review

Solvency II requirements were introduced in 2016 and will be reviewed in 2020. Preparations for the 2020 review are already well underway. The purpose of the review is to evaluate the extent to which the solvency requirements function as intended, keeping in mind that pension fund investments are long term in nature.


One of the priorities for IPD is that the Solvency II requirements become more proportionate, so that smaller Danish pension funds are not worse off compared to large European pension funds. New regulation and tougher demands to reporting tend to be much more expensive for smaller companies to implement. This must be addressed as part of the Solvency II review.


The Danish insurance and pension industry has always supported a high level of consumer protection and financial stability, which in part are due to the Solvency II requirements. However, it is important to strike the right balance. Tougher solvency requirements in the future can hinder long term investments, job creation and economic growth.


Positions of IPD

Insurance & Pension Denmark supports the underlying principles of Solvency II. Insurance & Pension Denmark also supports the need to carry out a review of the regulation in order to ensure that it is up to date.


The upcoming changes to Solvency II stemming from the 2020 review should take outset in the following: 


  • They must be cost balanced, as presumed and formulated by EIOPA
  • Elements of EIOPAs proposal that will introduce increased costs should not be included in the Commission’s final proposal, except the element that relates to negative interest rate shocks in the standard formula
  • EIOPA and the Commission shall publish a complete impact assessment of the costs that the individual countries will meet from the final proposal

The overall consequences of EIOPA’s proposal will, if not amended considerably, be increased costs for consumers, fewer investments in companies, reduced levels of growth and a reduction in the amount of long-term sustainable investments.


Insurance Europe has estimated the consequences at European level of EIOPA’s proposal. Most likely the proposal will:


  • Bind an additional 60 Bn. Euro in capital in insurance and pension companies. For Denmark, the proposal will bind app. 1.0-1.3 Bn. Euro.
  • Increase administration costs for insurance and pension companies by app. 7-13 Bn. Euro.
  • Reduce investments in shares by up to 170 Bn. Euro. In Denmark, investments in e.g. windmills and listed companies will be reduced by app. 3.3 – 4.7 Bn. Euro.


Apart from a reduction in the level of overall investment, EIOPA’s proposal will also cause a lower rate of return for pension savers and consequently also a reduced basis on which to collect taxes for national governments.


Climate, Solvency and Taxation

Jenny Maria Thers Rée

Senior Consultant, Actuary
+45 41 91 90 90
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