Simplification and Burden Reduction for a Stronger Insurance Market

Good morning, distinguished guests and attendees. 

It is truly a pleasure for me to be here this morning, to contribute to today’s session and take part in this conference, which addresses some of the most pressing challenges facing our industry today. 

Special thanks must go to our organisers, MCC, and of course, our moderator Dr. Heinrich Schradin.

Indeed, I look forward to gleaning some insight from some of the other speakers here today, as many of the issues they’ll touch upon – such as climate change, sustainability and, of course, AI and digital transformation – continue to significantly impact our sector on a daily basis.

But for now, please allow me to speak to you about something we continually – yet cautiously – advocate at EIOPA; something with the power to unlock considerable latent potential within the insurance industry – simplification and burden reduction (SBR). 

Though we seem to be framing many of the topics on today’s agenda as problems that need fixing, or roadblocks that need to be cleared, we mustn’t forget that such challenges also represent major opportunities. Simplification and burden reduction is a clear example of this.  

By reducing administrative burden, promoting supervisory convergence and pursuing truly effective harmonisation, we stand a much better chance of achieving a substantive, well-functioning Savings and Investments Union (SIU); one that genuinely promotes smarter capital flow, breeds competitiveness and facilitates the EU’s long-term strategic investment objectives. 

It is our view that, by fulfilling our role as supervisors, ensuring financial stability and working to maintain existing standards, we can collaborate with legislators and industry players in a more concerted, targeted and productive manner, and these efforts could result in: 

• A deeper, more integrated Single Market for insurance and pensions.
• A broader range of scalable retail investment products.
• Greater choice and value for money for European consumers.

European insurance today: the state of play

Before I dive a bit deeper into this, I’d first like us to take a quick look at where things currently stand.

To that effect, it is worth noting that Europe’s insurance sector is in a relatively good place in many regards. 

Despite ongoing volatilies, geopolitical tensions and wider economic uncertainty caused by tariffs, recent figures suggest that the sector remains relatively robust and resilient for the time being. 

Last month, EIOPA’s quarterly update on financial risks revealed that: 

• Insurers’ solvency ratios in Q1 of 2025 remained sturdy, with median values around 200%.
• A changing interest rate environment also saw an improvement in financial standing for IORPs over the same period, despite high market and asset return risks.
• That being said, currency market volatility is affecting European insurers and pension funds through their investments in USD assets.
• And the ongoing trade war and tariff policies reveal significant exposure to non-EU providers. 

It should also be emphasised that almost three quarters (70%) of European insurers’ assets are invested in the EU, while 30% – roughly €2.85 trillion – are held abroad. For IORPs, the share of non-domestic assets amounts to 45%, though this can include other EU countries. 

While diversification is important, a partial reallocation of this capital back to the EU could support the SIU while simultaneously providing reasonable returns for policyholders. I say “could”, for how and where to invest is, in the end, for the insurers and pension funds to decide for many good reasons.

Yet, as we know, Europe’s regulatory environment and more fragmented market structure can represent a barrier to this. 

As things currently stand, a European Single Market exists for insurance providers, but not really for consumers or investors – while insurers can operate across the EU with just one licence, consumers are protected in 27 different ways, depending on the Member State they are in, and investors need to deal with this fragmented market as well. This is something we need to improve on.

In addition, when it comes to investors and – in particular – retail investors, the EU also grapples with an entrenched practical issue, as retail investors in this part of the world continue to shun risk. 

Despite the benefits that market-based investments can offer, many European savers remain conservative. It is estimated that no less than 70% of EU household savings lie in bank deposits, offering little to no yield.

This can put consumers at a disadvantage, as they are not in a position to grow their wealth through engagement with financial markets and investment in alternative products and assets. This is an opportunity that needs to be explored, especially given the pension gap we have in the EU, where one in five Europeans risks living in poverty by retirement age.

To that end, we must ask ourselves, why is this so? And how can simplification and burden reduction foster a more dynamic market for retail investors?

Stumbling blocks: trust, value for money and supply

The fact of the matter is, Europeans remain sceptical; and in many cases, this is justified.

Our own consumer surveys reveal that less than half of EU consumers believe their savings and investment products offer value for money. Worse still, 60% believe it is difficult to receive unbiased advice when it comes to purchasing insurance or pension products, and just 29% believe the fees paid to insurance intermediaries and advisors are transparent and clear.

On the other hand, our value-for-money and mystery shopping exercises suggest that such issues are not necessarily structural, but rather, the result of questionable practices perpetrated by a minority of insurers, which may have led to a loss in consumer confidence. 

We conducted one such exercise across 8 Member States in 2024, examining distributors’ sale processes with regard to IBIPs. The outcome revealed that: 

• 84% of investment products sold by such distributors were consistent with at least one predefined need or objective.
• But practical inconsistencies were found, which could potentially lead to mis-selling.
• Perhaps owing to the way in which the framework is built, it also emerged that longer sessions or consultations didn’t necessarily lead to better outcomes for shoppers, suggesting that the sales process may be somewhat complex or bewildering for consumers.

Problematic divergences also exist between Member States and individual undertakings, and if we want consumer habits to change, such issues will have to be addressed.  

In this area too, there is room to consider simplification and burden reduction. Clearly, if we analyse the outcome of our mystery shopping exercise, the degree of information that needs to be shared with consumers interested in buying a product does not seem to pass the cost-benefit assessment.

This is why EIOPA has begun assessing where simplification and burden reduction can benefit both the consumer and the insurer. This must be coupled with a continued drive to enhance financial education and foster a culture of investment. An important way to do this is to provide simpler, more encouraging access to an adequate range of saving products that people actually want to invest in. 

Essential to achieving this goal will be better value for money and greater transparency.

Cause for concern: Europe’s burgeoning pension gap

Another major issue within the broader insurance sector – to which simplification and burden reduction may well offer a partial solution – is the ever-widening pension gap, which I alluded to earlier. 

Across the EU, just over three working-age people support each retiree, and the European Commission’s latest Ageing Report indicates that this ratio will decrease to two working-age individuals per retiree over the next 20 years. 

Needless to say, this will place growing strain on the state pension system and make the situation financially untenable over time. It may also prove particularly problematic for Germany, where the median age of the population remains the sixth highest in the EU, according to Eurostat data collated earlier this year.

Beyond pressures placed on public finances, an ageing population also generates considerable social risks unless sufficient protections are in place – and this is simply not the case at present. 

To combat this, urgent reform must be undertaken. Here, EIOPA stresses the importance of ensuring three strong pillars within the pension system in any given Member State. It is imperative that we strike a balance between robust public pension plans, on the one hand, and highly developed occupational and personal pensions, on the other. 

The most up-to-date data shows that just 23% of Europeans today benefit from an occupational pension scheme, while only 19% own a personal pension product. 

For its part, Germany has made efforts to address this issue in recent years. As early as 2002, the Riester Pension initiative set out to compensate decreasing state pensions by offering incentives and tax relief for schemes designed to fill protections gaps.

As we know, however, this project was only partially successful. Figures from the German Socio-Economic Panel (SOEP) suggest that only around 25% of the working-age population in Germany benefits from a Riester pension, and pension plans that fall under this umbrella are often criticised for being unevenly distributed and primarily the preserve of higher-income workers.

This has let to many debates and questions about the pension system in Germany. What I can say is, you are not alone in this. 

Though pensions are very “national” by nature, embedded in national social and labour law, and related to local culture and supported by tax regimes or not, the need to address the pension gap and consider reforms is a problem member states share across EU. So, even though solutions need to be found nationally to a large extent, there is also an opportunity to share and learn within the EU and benefit from this experience together.

Seeking solutions: simplification, burden reduction, supervisory convergence 

So, having outlined some of the roadblocks facing the insurance and pensions sector today, I revert to my original question: how can simplification and burden reduction offer – at least a partial – solution?

Well, of course, efforts made in this regard are by no means a panacea; but EIOPA is of the opinion that we can strike a better balance. 

We believe targeted reforms could result in less onerous – but continually effective – regulatory and supervisory conditions, which will help foster a stronger, more integrated Single Market for financial products like insurance and pensions. The Draghi report on The future of European competitiveness clearly identified excessive regulation as a hindrance to the European economy; a sentiment very much echoed in the European Commission’s Competitiveness Compass, which explicitly calls for regulatory simplification and administrative relief.

Provided that we can maintain existing standards for robustness, ensure financial stability and continue to adequately protect the consumer, EIOPA supports this objective and will continue to support the Commission in simplification and burden reduction initiatives.

We have delivered our technical advice and input on this matter through various consultations and publications, with the aim of promoting supervisory convergence, reducing fragmentation across Member States, and introducing streamlining measures that lead to a a stronger, more cohesive regulatory framework – rather than introducing new gaps, inconsistencies or unintended burdens elsewhere.

Legislative review recommendations 

Within our remit, we have proactively advanced a host of simplification recommendations in relation to the Solvency II Directive, for instance. We proposed various amendments to existing supervisory and disclosure requirements, with the goal of easing the burden on insurers. In addition, we have called for greater use of proptionality principles, by appealing for considerably reduced reporting requirements for solo undertakings and SNCUs, for example. 

Overall, we advocate decreasing the number of applicable guidelines in Solvency II by 25%, streamlining reporting templates, and reducing the frequency of stress tests for insurers and IORPs. 

At the same time, we have communicated our concerns regarding proposals made for substantial capital relief – while we understand the need for Europe to boost economic growth, we need to ensure overall capital in the sector remains adequate to maintain resilience and withstand market turbulence, particularly now, with geopolitical tensions running high.

When it comes to the Insurance Distribution Directive (IDD) too, we strongly advocate review measures, in partular those designed to simplify the customer journey and facilitate consumers’ access to IBIPs. Though the Directive was initially designed to protect consumers, experience has shown that some rules may have unintentionally deterred a sizeable cohort by making the insurance sales process more complex, off-putting or inaccessible, while creating some unnecessary administrative burden for providers and insurance intermediaries. 

In addition, the IDD’s minimum harmonisation framework has resulted in market fragmentation and regulatory arbitrage, creating obstacles for cross-border business. We are now looking at potential ways to ensure the IDD’s provisions remain effective and proportionate, particularly in light of increasing digitalisation within the distribution framework.

For its part, the PEPP Regulation was designed to create a vibrant market for pan-European pension products, but its impact so far has been limited and Europe’s internal market for IORPs remains underdeveloped. Rather than repealing the regulation, EIOPA once again advocates targeted amendments that would simplify the current framework, facilitate cross-border provision, and ensure pan-European pensions are a safe and trustworthy product.  

Chief among our recommendations is the introduction of a “EuroPension” label, with simplified core features, which could help boost awareness of and engagement with cross-border pension investments. 

This label would focus heavily on consumer outcomes, prioritising value for money and removing sub-account requirements, for a frictionless process. The creation of a 28^th regime, with a truly harmonised pan-European regulatory framework, is another proposal that could stimulate the market for cross-border pensions and help address existing protection gaps. 

Finally, to strengthen the IORP II Directive, EIOPA also proposes several forms of streamlining and simplification – namely the clarification of the Directive’s scope and definitions, addressing implementation challenges faced by NCAs, and introducing standardised EU-level disclosure and reporting requirements. 

Empowering NCAs to collect data and report it to EIOPA would also improve oversight, while adopting a risk-based approach to the Prudent Person Rule could help expand investment opportunities in alternative assets, ultimately leading to more diverse portfolios and driving economic growth.

Concluding remarks

Though the examples I have given are but a few, they demonstrate that simplification and burden reduction shouldn’t be perceived as mere operational or regulatory aspirations – they are essential catalysts for progress. 

By reducing administrative complexity, fostering supervisory convergence, and harmonising reporting requirements, among others, we believe we can unlock a great deal of potential within our industry – creating a more dynamic, competitive and consumer-centric market in the process.

• For insurers and IORPs, streamlined processes can help improve operational efficiency and the ability to focus resources on innovation and growth.
• For consumers, simplification translates into clearer choices, better value for money, and greater access to suitable products.
• And for Europe as a whole, a more integrated Single Market for insurance and pensions can drive capital flow, support long-term investment, and strengthen our collective resilience in the face of economic and demographic challenges.

Of course, simplification and burden reduction alone cannot achieve this. Rather, they are one piece of a larger puzzle – an essential tool for finding capital and helping to mobilise it so that consumers can invest more.

Taking into account that each Member State has its own specificities, we must remain vigilant and guard against any compromising of existing standards – we should embrace simplification not as a concession, but as a strategic imperative. 

By doing so, we can build a thriving, consumer-focused insurance sector, which better facilitates Europe’s economic ambitions. 

Thank you.