EU lawmakers approve plan to ease capital rules for insurers

(Reuters) — European Union lawmakers Tuesday approved a revision to the bloc’s capital rules for insurers that would unblock billions of euros and widen asset allocation options to allow increased investment in climate-friendly and long-term projects.

The European Parliament’s economic affairs committee approved a compromise on the EU’s Solvency II rules, opening the door to negotiations with member states on a final deal that will become law.

The plans mirror British moves to reform the Solvency II rules it inherited from the bloc. The British reforms seek to unlock up to £90 billion ($117.89 billion) of investment capital for high-growth companies and green and infrastructure projects, widely viewed by backers of Brexit as a financial market gain from leaving the EU.

“Solvency II is the world’s gold standard for insurance regulation, but so far its calibration has been overly conservative,” said Markus Ferber, the German center-right committee member who is parliament’s main negotiator on the law. “As a result, European insurance companies are forced to hold hundreds of billions in excess capital.”

The EU reform will also mean that small, less risky insurers will benefit from reduced requirements for reporting to regulators, Mr. Ferber said.

“We are moving from one-size-fits-all solutions to more risk-based supervision,” he said.

EU states have already agreed on their own position, but the committee wants to go further in offering capital relief to insurers and give more flexibility for long-term equity investments.

The lawmakers backed more comprehensive sustainability disclosures, risk management and reporting from insurers than put forward by EU states.

There was pressure to grant insurers less stringent capital requirements on green investments, but this was rejected by lawmakers to avoid diluting policyholder protection.