1 Shaping a Constructive Regulatory Environment: EU actions Madrid, 9 June 2010 Prof. Karel VAN HULLE Head of Insurance and Pensions

2 Actions undertaken by the EU Support of action at international level (G20, FSB, Joint Forum) Adoption of EU action plan by Finance Ministers (ECOFIN) Review of Solvency II in light of crisis Improvement of the supervisory architecture in the EU Strengthening of policyholder protection

3 G20 inspired initiatives relevant for insurance Risks related to off-balance sheet items Regulation of credit rating agencies Crisis management Colleges of supervisors for largest cross- border groups Alignment of interest of originators and investors in securitisations Remuneration

4 Action Plan ECOFIN Avoid procyclicality in prudential regulation Crisis prevention measures and clarification of State aid rules in cases of cross-border crisis Strengthening of financial education Corporate governance in the financial services sector

5 Solvency II and financial crisis Stakeholders confirm that S II is needed because of economic risk based approach CEIOPS publishes paper « lessons learned from the financial crisis » in February 2009 Text of Framework Directive is amended taking account of lessons learned from the financial crisis

6 Changes in Solvency II Framework Directive Supervisory authorities must give proper consideration to financial stability and potential procyclical effects of their actions Avoidance of procyclical effects in standard formula (dampener in equity risk submodule) Extension of recovery period in the event of exceptional fall in financial markets

7 Solvency II Timetable for Directive development (Commission) CEIOPS work on technical advice necessary for implementing measures / supervisory convergence / preparation for implementation / training & development Directive adoption (Council & Parliament) Implementation (Member states) QIS 2 July 2007 Solvency II Proposal - Adopted Directive published in December 2009 QIS 3 Commission preparatory work implementing measures Adoption of implementing measures QIS 4 October 2012 Solvency II enters into force QIS 5

8 New Supervisory Architecture Macro-economic: European Systemic Risk Board Micro-level: transformation of existing EU committees of supervisors into EU Authorities (CEIOPS becomes EIOPA) Supervision remains at national level but with strengthening of EU level

9 Further improvement of policyholder protection White Paper on Insurance Guarantee Schemes (June 2010) Cross-sectoral harmonisation of regulation dealing with packaged retail investment products (2011) Review of the Insurance Mediation Directive (2011)

10 Concluding remarks Regulatory action should be based on transparency and consultation (better regulation) International cooperation and convergence of regulation are of primordial importance Solvency II will seriously upgrade the regulatory framework within the EU The creation of EIOPA will lead to a further professionalisation of insurance supervision in the EU