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European Insurance and Occupational Pensions Authority
Speech21 March 202420 min read

Insurance and Pensions Supervision for a More Resilient Society

Speech delivered by Petra Hielkema at the CRO Forum in Venice, Italy on Thursday, 21 March 2024 CHECK AGAINST DELIVERY

Good afternoon, ladies and gentlemen,

I appreciate the opportunity to join you at this 20th-anniversary event: Happy Birthday!

The CRO Forum plays a valuable role in strengthening the resilience, competitiveness, and sustainability of the insurance sector, and EIOPA welcomes the opportunities that we have to engage with this forum.

We are here to discuss challenges within the insurance industry, but in fact, we are also confronting significant societal questions:

  • How can we ensure that natural catastrophes remain insurable in the future?
  • What can we do so that as Europe’s population gets older, citizens can rely on dignified income after retirement?
  • How can we promote European competitiveness while equally protecting citizens—no matter where in the EU they live or purchase insurance?
  • And finally, what must we consider to responsibly manage AI and emerging technologies for an equitable benefit for all?

The reality is, these environmental, economic, and technological challenges that give rise to these questions have real impacts on societal resilience. They pose potential systemic risks that can make our societies more vulnerable.

It goes without saying that addressing these to build societal resilience requires a coordinated, holistic approach, with the dedicated participation of all relevant stakeholders.  

Today, I would like to tell you about EIOPA's work across these critical areas—from climate change adaptation and mitigation, to addressing pension gaps, improving cross-border business, and finally, on getting the most out AI while protecting European citizens.


Part I: Nat Cat

Let me start with the natural catastrophe protection gap. Natural catastrophe losses in the EU are estimated at over 650 billion euro since 1980. And the vast majority of these—some 75%—remain uninsured.

There was a time when these figures did not provoke the same sense of urgency as they do today. Now, there is a genuine recognition—among citizens, policy makers and the industry—that the effects of climate change pose a significant threat to the economy, financial stability, and lead to exclusion.

More than this, the growing cost of natural catastrophes puts into question the fundamental role of the insurance sector as the risk manager of our societies: What happens when certain risks become too costly to insure? Who should, and who can, shoulder the growing scale of such events?

This is not a philosophical question, but rather a call to action to minimize the likelihood of this scenario, both, by mitigating climate change to reduce the severity of natural catastrophes, but also by implementing risk mitigation strategies to lessen the impact when they do occur.

This is why EIOPA's activities in climate change start with improving the understanding of the insurance protection gap, focusing on prevention measures, and addressing the low demand for nat cat insurance.

In collaboration with the European Central Bank we are also exploring policy options on how to better insure EU households and businesses against climate-related natural catastrophes. Last year we issued a joint discussion paper in which we propose policy options aimed at increasing the uptake and efficiency of climate catastrophe insurance—while creating incentives to adapt to and reduce climate risks.

We advocated for a comprehensive solution to expand coverage with four pillars. These are:

  • (1) policies designed with adaptation and mitigation measures;
  • (2) catastrophe bonds;
  • (3) public-private partnerships at the national level;
  • (4) and partnerships at the EU level to cover losses that may be difficult to insure against via market-based solutions only.

It is clear that in order to make sure that climate change-related risks remain insurable in the future, both consumers and insurers need to contribute to climate change adaptation and mitigation.

Impact underwriting, that is, insurance provisions specifically designed to encourage consumers to reduce their vulnerability to climate-related risks, will help. This can mean risk-based pricing, for example. And insurers have the data, expertise, and risk assessment capacity to do this. In turn, consumers will have an incentive to do what is in their hands.

Another part of the solution entails the use of capital market instruments such as catastrophe bonds. These offer insurers and private reinsurers a way to transfer some of the risk associated with underwriting policies on to capital markets.

We also need to strengthen public-private partnerships at the national level as these can also contribute to a greater resilience of the insurance sector. They can support the insurance market by providing additional coverage either via direct insurance or by indemnifying a private (re)insurer against extraordinary events. The same applies to partnerships at the EU level.

So this is the four-ladder approach. But let me say a few more words on public-private-partnerships in particular.

For a successful model on PPPs, there is a role for everyone to play: citizens, insurers, governments, and of course supervisors.

  • The basis for sound PPPs is rooted in the first step of the ladder—risk mitigation and adaptation—with citizens protecting themselves by doing what is in their power to reduce their exposure to natural catastrophes.
  • There is a role here for national governments, it is to communicate clearly to citizens about where the public authorities can and cannot step in. Last summer EIOPA looked at consumer behaviour impacting the demand side of nat cat insurance. We discovered that one of the main reasons people do not take up natural catastrophe insurance is their belief that their government will step in, step in to a far greater extent than it actually can. So countering this false perception with honest, clear and easy to understand information is important.
  • Finally there is room for greater collaboration between the industry and local governments, for example, for City Councils to engage with insurers and draw on their expertise to fully assess potential nat cat risks before making decisions on new developments. This is important for resilient urban development, too. It is in this context that EIOPA is happy it was asked to join the Climate Resilience Dialogue, created by the European Commission. The goal of the Dialogue is to create a forum for discussion that will strengthen the collective understanding of insurers, reinsurers, businesses, consumers, supervisors and other stakeholders about the climate protection gap.

EIOPA is continuing to work together with the ECB to further promote policy options designed to increase the uptake of climate catastrophe insurance, while creating incentives for people to adapt to and reduce climate risks.

Presently we are looking at public-private partnerships that exist at national level—both within and beyond the EU—to draw lessons that are relevant for the EU market.

Decisions on how to make insurance available and more affordable are also political. This applies to the creation of PPPs at national level as well. The political will must come from national governments. And when it does, EIOPA is there to support the political impetus with factual, assessments. We can reinforce the debate with sound technical findings and by sharing knowledge so that PPPs can be established successfully.

In our latest work with the ECB we have reviewed and assessed 12 national catastrophe pooling schemes with different degrees of public sector involvement. We are studying their key characteristics. We are asking what are their strategic objectives, their scope, their design? How do they manage risks? And what financing strategies underlie them? Insights gained from this analysis will also serve as a basis for future discussions with the insurance sector and with policy makers.

* * *


Part II: Pension gaps

I would now like to turn to the second potential systemic risk EIOPA is working to address—and that is, pension gaps.

Europe’s pensions landscape is a fragmented one, with different systems in place across the Union. Nevertheless, the predicament we are facing is shared: Europeans are growing older, living longer. In and of itself, this is a privilege and a reason to be thankful. At the same time, securing that dignified retirement is becoming more challenging.

At the moment, every fifth senior citizen in the EU is at risk of poverty or social exclusion. In absolute numbers, this means more than 17 million people. I remember speaking on this topic not too long ago [4 years ago] and at the time, one million fewer Europeans were affected.

What’s more, this risk of poverty is almost 35% higher for women than it is for men. This is not a surprise when we consider that the average pension women receive is nearly 30% smaller than that of men.

This is the picture today. When we look into the future, we see other problems emerging beyond the high risk of poverty and the significant gender pensions gap. In the coming decades, the number of Europeans aged over 65 is going to rise dramatically. Today, for every retired person, there are almost three people of working age. Look ahead 45 years, it will be only half of that—1.5 working-age people per retired person. And the average state pension as a percentage of earnings at retirement will fall significantly.

This is a slow-burning, but serious problem, for citizens and for governments. If a large portion of the aging population faces financial insecurity in retirement, it can impact consumer spending patterns, economic growth, and the overall well-being of societies.

Solving the growing pensions gap will require a multiphase effort. Here are some of the elements that, in EIOPA’s view, contribute to the solution.

[Solutions: 3 pillars]

First, in order to provide a comprehensive and sustainable retirement income for citizens, European countries need to develop all three pillars of their pension systems, that is a public or state pension system (pillar 1), occupational or employer-sponsored pension schemes (pillar 2), and individual or private savings and investments (pillar 3).

There are numerous benefits to the three-pillar system.

First of all, more financial stability for citizens, because they no longer depend on a state pension alone.

Occupational pensions offer a relatively easy way for people to save directly from their salary. This is especially true when there is automatic enrolment.  

Finally, we need more simpler long-term savings products for people to invest in on an individual basis. I will say more about this later.

Increased pension savings, in turn, support the capital markets union by channelling capital to finance the long-term growth of the real economy, and its green and digital transition.

Europe needs sustainable pensions that make it possible for citizens to thrive, and not merely survive. When we help create a demographic group that has money to spend, we also unlock money for the capital markets.

And finally, a system in which citizens actively contribute towards their pensionable income results in a more financially literate and secure population, and this in turn supports the growth of the silver economy.

And we have seen proof of this: Countries that have a three-pillar approach consistently rank on top in terms of citizens’ trust in the pension system, their financial literacy, and in the development of their silver economy.

So the expansion of the three pillar system across the EU is one element of the solution. And we need governments to think about this.

[Solutions: Better data, better tools PTS and dashboards]

The second part of the solution involves collecting better data and raising greater awareness about pension gaps. After all, the starting point of addressing gaps is to know where they are. To achieve this, we need tools: pension tracking systems for individual citizens, and pension dashboards for policy makers.

Citizens need to know what pensionable income they will receive from all three pillars.  Pension tracking systems would allow them to see their actual entitlements. This information would help them make informed decisions about their spendings and saving, and to take personal responsibility for their long-term financial planning.

Policymakers also need data. They need to be able to monitor national pension systems to develop initiatives that can help close the pension gaps. The collection of data from private pension providers can support policymakers in this endeavour. And this is where pension dashboards come in. Not only to show what is saved already, but also to facilitate an informed decision for policy actions to reduce the pension gap. Good decisions require an holistic approach, pensions boards support that.

For several years, EIOPA has advocated for specific measures to address the pensions gap. In 2021, we provided advice to the Commission on both national pension tracking systems and pension dashboards. As a new political cycle approaches, we anticipate renewed attention to these issues.

In EIOPA’s view, it is crucial to take the right step forward by developing a European-level pension dashboard as well as national pension dashboards and encouraging Member States to establish a national PTS and implement auto-enrolment in occupational pension schemes. We look to the Commission in the next political cycle with these priorities in mind.

[Solutions: Education and awareness]

Pension dashboards and pension tracking systems would already result in a lot more transparency. But this is also the beginning. Citizens would benefit from greater financial literacy and clear information about their own situation. New mothers should be able to see how a decision to stay home to care for their young child will impact their pensions. Young adults starting out their careers, those who are uncertain about their finances, or those who are facing financial difficulties would benefit from regular financial health checks.

People should not start thinking about their pensions as their retirement approaches. And so we need to promote pensions savings and educate people early on, on the important of saving for their future from day one of their working life. And this will require a shift in the mindset of Europeans.

There is room here to have a positive impact and the industry has an opportunity to have a leading role. When people recognize the limitations of state pensions, they become more proactive in planning for their retirement. We observe this trend in other countries. The US is a great example here. A part of financial literacy is the understanding that one has to take a proactive role.

[Solutions: a strengthened 3rd pillar]

And this brings me to the third factor that would contribute to reducing the pension gap: a stronger third pillar. This means more pension products that are tailored to today’s diverse workforce. Freelancers, independent contractors, gig economy workers, and other self-employed people would benefit from greater flexibility in private pensions.

The Pan-European Personal Pension product, or PEPP, is an example of this. It is the first personal pension product designed to address the needs of this group. It is digital. It is portable. It is cost-effective. And it is not a success so far. Why is that?

While the uptake of PEPP is still low, we expect this to improve with time and better economic conditions. In addition, the PEPP regulation, which started to apply two years ago, is paving the way for the new voluntary EU-wide personal pension scheme for people to save for their retirement. Some new developments, for example in France, show that features of the PEPP are taken onboard. With the Commission review of this legislation in sight, there is the potential to make more of this. For this legislation it will be important to do three things 1) look at the tax treatment, 2) look at the cost cap and 3) not only focus on the cross border element, but on all the other positive features I just mentioned. The key is to allow more people to join retirement saving schemes.


* * *


Part III: Cross-border business

Ladies and gentlemen,

I have outlined some of the work that EIOPA does with respect to protection gaps in natural catastrophe insurance and pensions. Allow me now to turn to our core business—that is, supervision—and say a few words on cross-border business, in particular. 

Unlike other markets, the insurance sector is inherently cross-border. This is not surprising given passporting and digitalisation. European insurers increasingly engage in cross-border business, which accounts for some 11% of gross written premia within our Single Market. And as you can see from the graph on the right side of the slide, cross border business within the EU is steadily increasing for non-life insurance, and it has remained constant in life-insurance.

Insurers, more so than banks, represent the main distribution channel for offering savings and investment possibilities for citizens, including for their retirement. And because insurers have the potential to reach a considerable number of retail investors in Europe, this increased cross-border activity can deepen the Single Market by providing consumers with a wider range of investment opportunities for their savings and pensions.

This is what we want to support. But it has to go hand in hand with consumer protection. Citizens should be afforded the same level of protection, irrespective of where in the EU they live or from where or from whom they purchase their insurance. Citizens need to be able to trust that the same rules are enforced throughout Europe. We need supervisory integration.

The Single Market aims for a unified and integrated economic area, and achieving a high level of harmonization is part of that. We see that even when it comes to Solvency II which is a maximum harmonisation Directive, there are still noticeable differences in how different supervisory authorities interpret and implement it.

Let me give the example of internal models.

Internal models give insurers wide discretion in calculating their risks. This includes expert judgement and reliance on internal historical data.

Likewise, their supervision requires significant resources and expertise and can be challenging. A certain degree of supervisory judgement is also necessary and indeed unavoidable.

EIOPA has an important role in ensuring supervisory convergence across Member States, providing technical assistance when needed, so that similar approaches are followed when it comes to authorising internal models.

Without this, the level playing field and fair competition is put at risk.

The Insurance Distribution Directive (IDD) by contrast, is a minimum harmonisation Directive, which allows for national specificities, and these result in a divergence of supervisory practices.

EIOPA has a role to act in, in particular when insurance companies that operate on a cross-border basis in several countries face difficulties and pose risks for consumers. In recent years we have seen a number of such cases, usually where companies prioritize short-term profits over consumer value. And when problems occur, we need to have the powers to fix them. This means that in case national supervisors are unable or unwilling to act, EIOPA needs to be able to step in.

And as the way in which we work becomes more digital, we can expect a further increase to cross-border insurance business, and so sound supervision of cross-border cases becomes that much more important.

* * *


Part IV: Digital transformation and AI

And this brings me to my final topic: the use of AI in the insurance sector.

Last year EIOPA did a Digitalisation Market Monitoring Survey, where we asked insurers about their current use of AI (this is what you see in the top half of the slide) and how they expect this to evolve in the coming years (shown here on the bottom half). We found that when it comes to non-life insurance, AI is being used by half of the respondents, and an additional 30% expect to start using it in the next three years. This is huge. When it comes to life insurance, the figures are somewhat lower, but still significant. Here, a quarter of our respondents said they use AI and another 40% expect to start using it soon.

AI of course presents great opportunities for insurance companies and for consumers: faster and more efficient processes, lower operational costs, and products and services tailored to the needs and preferences of customers—many of which can be accessed around the clock from just about anywhere.

But as with the emergence of any new technologies, there are also challenges. On the one hand, there is a rise in cyber risks, and so robust and resilient IT systems are needed. And on the other hand, we also have to keep ethical considerations in mind: data privacy leading to biased or discriminatory practices and even financial exclusion. So when we speak of AI, we must, first and foremost, ensure that innovation is in the interest of people.

As AI systems become more sophisticated, and the application of AI across the whole value chain continues to expand, the risks will evolve. And so there is a need for a regulatory and supervisory response. And we are seeing different responses emerge around the globe. The AI Act is the European one.  It is a very comprehensive piece of legislation and supervision of AI is a huge task.

EIOPA is now analysing what is needed to best supervise AI in a convergent way.


I said earlier that in addressing challenges facing insurers, we are inevitably trying to answer broader societal questions. This is especially the case when it comes to AI and open data.

Insurance is founded on risk pooling—the principle of sharing the financial burden of losses among a larger community to minimize the impact on any single individual or entity. This allows for more stability and fairness in the distribution of risk, keeping the costs of unexpected events manageable for all members of the group.

But how will Big Data change that?

We are moving from having no idea about individual risks to having so much granular data that individual risk can be monitored and assessed much more precisely. As the risk pools become smaller and smaller, and we move from probability closer to certainty, what becomes of insurance?

This consideration is at the root of the ethical debate concerning what personal data should be used for deciding on access to insurance, and the ‘right to be forgotten’ for cancer survivors.  How we as societies decide to proceed on this is very much linked to our understanding of mutualisation.

In this context, change and more granular data can support both financial exclusion and financial inclusion. We should I think use more granular data to support a stronger prudential system – one that takes better account of risk – as this clearly serves our overall resilience, yet we should not allow this to undermine inclusion and be at the cost of unfair treatment of some consumers. That means paying more attention to measuring exclusion and inclusion, and paying more attention to exclusions on contracts, always looking at these from a fairness standpoint.

We can also increase financial inclusion by being smarter: through so-called preventative insurance, and also by improving transparency – making the value of quality insurance clearer.

People need to be able to share their data but also to take back that consent, to be in control, and to trust the insurance sector with their data.

The ethical debate on insurability and mutualisation has of course a political dimension, but insurers have a voice as well and this can reinforce the broader discussion. We have to ask who is paying for the risk? Governments? Individuals? Groups? And this is something we all need to think about moving forward.

To conclude, I would like to step back from these ethical questions and briefly comment on EIOPA’s vision for the priorities of the new Commission.

  • We want to see natural catastrophe protection gaps as a key priority on the strategic agenda during the next EU institutional cycle.
  • When it comes to pension gaps, we need better tools, such as PTS, to allow for a better data collection, simplicity and comparability that leads to an increased awareness.
  • EIOPA’s vision is to ensure that supervision develops to reflect the increasing volume of cross-border activity. If we are to have a true Single Market for the insurance sector, should we also have more supervisory powers or indeed more supervision at EU level?
  • And finally, on the ethical and responsible management of AI, we will continue to engage with the Commission to better define our own role in the governance framework of AI. As the sectoral authority, we see a value in EIOPA having a voice, to make the needs and specificities of the insurance sector are reflected in the guidance that is issued.

What can you, the industry, do?

The insurance industry has two key opportunities:

  • One: to raise consumer awareness and empower informed decision-making. Speak to the risks, but also speak to the benefits of insurance.
  • And second: Together we have the opportunity to enhance European competitiveness—and I place a strong accent on “European” here. Do we keep everything as it is, with minimum harmonisation and lots of national powers while competing with each other within the EU? Or do we build a true and strong single market that serves all EU consumers equally well while competing at the global level?

This is what we need for a society that is more resilient to the risks and challenges facing us today and in the years to come.

Thank you.


Publication date
21 March 2024