Insurance Europe, the leading association representing insurance and reinsurance companies, has highlighted crucial priorities for the advancement of the Capital Market Union (CMU), underscoring the need to bolster retail investment, diversify funding avenues for European businesses, and cultivate an environment conducive to innovation, competition, and growth within EU enterprises.
Initiated a decade ago, the CMU aims to forge a unified capital market to facilitate the flow of investments and savings across the European Union.
In a position paper, Insurance Europe emphasized the substantial role of the insurance industry, not only in furnishing financial protection but also in offering pensions and savings, and serving as a significant long-term institutional investor.
European insurers currently channel nearly €9.5 trillion into the economy, with 69 percent of these investments in equity, corporate, and sovereign bonds situated within the EU.
Olav Jones, Deputy Director General of Insurance Europe, asserted, “The Capital Markets Union must be a priority to unlock investment that fosters a green, digital, globally competitive Europe. The EU must now concentrate on facilitating increased retail investment, alleviating overregulation and reporting burdens, and expanding access to SME equity, venture capital, SME debt, and infrastructure.”
“By achieving these objectives, the insurance sector can contribute to financing the green and digital transition while continuing to invest for the long term. This will stimulate growth, generate more employment opportunities, and pave the way for a financially and economically robust Europe.”
Insurance Europe has delineated several key priorities for the Capital Market Union (CMU):
1. Simplifying consumer investment in savings and pension products: A study revealed that 72 percent of citizens do not invest in any financial products. The EU’s Retail Investment Strategy should enhance awareness and streamline the investment process for Europeans.
2. Revising prudential regulations: The ongoing Solvency II Review, the EU’s regulatory framework for insurance, must address excessive capital requirements and volatility that hinder long-term, guaranteed, and profit-sharing products, as well as investments.
3. Enhancing financial and insurance education: Enhancing the knowledge, confidence, and skills of Europeans regarding financial products is imperative. Implementing pension dashboards and tracking systems can encourage citizens to increase their investments.
4. Expanding insurers’ access to various funds: Augmenting access to SME equity, venture capital, SME debt, and infrastructure funds provides essential scale and opportunities for insurers. Assessing and broadening the utilization of successful funds is crucial.
5. Facilitating cross-border investment: Building trust and confidence in cross-border investments can be accomplished by improving insolvency laws and bolstering protections for intra-EU investments.
6. Reducing regulatory burdens: The European Commission should fulfill its commitment to reducing regulatory reporting by 25 percent. Introducing new regulations should only occur when necessary, ensuring they are straightforward, proportionate, and avoid unintended consequences.
