Smarter, Simpler, Stronger: Insurance and Pensions for the Future

Good morning, everyone,

It is my great pleasure to welcome you to this year's EIOPA conference.

I would like to start by thanking Shigeru Ariizumi for his insightful reflections on the strategic themes of the IAIS going forward. You will hear me address some of the same priorities in EIOPA's own work. This is because we live in an increasingly interconnected world, where risks that emerge in one region can rapidly spread and impact economies, industries, and by extension, insurance sectors worldwide. And it is because the industry operates on a global scale that supervisors need to collaborate.

At our annual conference last year, we looked ahead and discussed emerging risks. Since then, much has changed. The year 2024 was marked by elections in various parts of the world, including Europe, and we are at the start of a new legislative cycle, with a new European Commission and a new Parliament in place.

While inflation has eased, other risks persist. The war in Ukraine is, sadly, still ongoing with the potential for further escalation which is very concerning. Climate change is driving more frequent and intense weather events, and we are seeing the effects of rising temperatures, heatwaves, wildfires, and air pollution on public health.

The rapid development of AI is raising questions around regulation, security, and ethics. Similarly, the rise of cyber threats presents a growing concern, especially with the possibility of state actors deploying cyber-attacks.

If we compare last year's outlook with today's reality, we see that the risks we discussed last year were not hypothetical but that the problems we face are real and demand solutions.

Many of you will have read the recent Draghi and Letta reports, which outline the challenges facing the EU and offer concrete recommendations. They highlight the need to rethink our Single Market and enhance Europe's competitiveness. Europe, an old continent, must accelerate its technological development for the benefit of everyone.

The insurance and pensions sectors are seen as key contributors to this: from building a Savings and Investment Union and boosting savings through investment and pension products to enhancing European supervision and the securitisation framework.

What does this mean for the insurance and pension industry? I believe it comes down to five key imperatives:

1. Being robust and resilient in the face of volatility and increasing risks
2. Truly living our purpose to protect and provide peace of mind
3. Building a market that is fair and inclusive for all consumers
4. Becoming adaptive and data-driven in addressing emerging risks, and
5. Getting smarter and more efficient to deliver real value.

…being robust and resilient

Let me begin with resilience, because this is the only way our industry can support the ongoing transitions. We need risk and evidence-based capital requirements to maintain stability, particularly during uncertain times. Some may argue that the absence of full-scale failures justifies lowering capital requirements. I would argue that we managed recent crises without major failures precisely because of solid capital requirements. The industry needs to be robust to withstand any financial distress that could lead to failures, as we observed in several cases of portfolio transfers. We have seen the consequences of lowering capital standards before-back in the 2000s with cities competing by lowering capital standards. We also know where this brought us, and it is not something we need to relive.

The ongoing review of Solvency II is one measure to strengthen the resilience of the insurance sector. It contains many amendments which reflect EIOPA's recommendations and which will increase the industry's capacity to handle shocks, while also encouraging long-term investment in the green and digital transitions:

• First, the Insurance Recovery and ResolutionDirective will improve how we prepare for and manage insurers in distress or at risk of failure.
• Second, the inclusion of a macroprudential perspective in Solvency II will strengthen our ability to address systemic risks.
• Third, EIOPA has made recommendations to the European Commission for an additional capital charge for fossil fuel-related assets, to better align insurers' capital requirements with their risk exposures.
• And fourth, we have strengthened the proportionality framework, so that requirements are better suited to the size, complexity, and risk profile of individual insurers.

Another important measure to boost the resilience of our sectors is the introduction of the Digital Operational Resilience Act (DORA). It sets clear expectations for financial institutions, including insurers, to withstand and recover from disruptions like cyberattacks or system failures. By embedding resilience into the regulatory framework, we are not just protecting individual entities, but also ensuring the integrity of the financial system as a whole.

Looking ahead, the AI Act, together with Solvency II, will be crucial in managing risks from AI's growing use in the insurance sector. As AI expands, we must ensure its responsible use with strong oversight. The Act provides a framework for transparency, fairness, and accountability, helping safeguard consumer trust while fostering innovation.

… living our purpose to protect and provide

Now I would like to move to my second imperative for the insurance and pensions sectors, and that is to truly live our purpose to protect society from major risks and provide peace of mind. If there was ever a moment to deliver on this purpose, it is now. The industry has an unparalleled role to play in addressing the urgency of growing gaps in natural catastrophe protection and in pensions.

EIOPA's own activities in addressing the nat cat protection start with improving the understanding of the gap-this is where our natcat dashboard comes in-by focusing on prevention measures and addressing the low demand for nat cat insurance.

In collaboration with the ECB, 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 have continued collaborating with the ECB and will soon publish another joint paper proposing solutions specifically for PPPs.

To keep nat cat risks insurable, we must start with adaptation and mitigation measures. Insurers can lead this effort through ex ante risk assessments and impact underwriting, using their data and expertise to incentivize citizens, cities and governments to reduce their exposure to natural disasters.

But it cannot stop there. We also need to consider mechanisms to pool and share the risk of natural catastrophes. Public-private partnerships which allow insurers, governments, and other stakeholders to distribute the burden of these risks can help increase our resilience to nat cat events and by spreading the financial risk, help ensure that their impact does not overwhelm any one party.

Whenit comes to pension gaps, we will need a range of solutions: tailored ones to account for the differences in pension systems across Member States, but also common approaches, because ageing populations and fewer workers to support retirees, is the core problem that affects us all.

With most developed pension markets relying on a three-pillar system, we must adopt a holistic approach to retirement savings, considering all three pillars. While the first pillar is essential, it may not be sufficient on its own. In this context, EIOPA supports the introduction of auto-enrolment in occupational pension schemes to encourage additional savings. Financial education and simple retirement products, as highlighted in the Draghi and Letta reports, should be prioritized.

To take a more holistic approach to pensions, we first need to identify existing gaps. This is why I emphasize the importance of personal pension tracking systems for individuals and pension dashboards for policymakers. These tools will enhance transparency, highlight the urgency of pension gaps, and support more informed decision-making.

And finally, we need to recognise that there is also a cyber and health gap, where less data and analysis may be available, yet it will need our full attention, for both are real. The risks are felt, the products are not there yet, but a demand needs to be met.

…being fair and inclusive

This brings me to the third imperative: that we must be fair and inclusive.For our industry to remain relevant, it must maintain-and grow-consumer trust while serving all segments of society. This trust is closely tied to the perceived value for money of insurance and pensions products.

Preliminary Eurobarometer figures show that only 45% of European consumers believe their insurance-based investment products offer value for money, while 30% are unsure, and 25% do not.

It is in this context that Verena Ross and I wrote a letter to the EU institutions, highlighting the need for a meaningful review of the retail investment framework. To this end, the strategy should avoid unnecessary complexity, ensure a level playing field, and minimize administrative burdens for both the industry and supervisors. Its aim should be to create a true European market where consumers can invest confidently in investment and retirement products that offer real value for money.

A key aspect of this effort is EIOPA's work on Value for Money. Consumers need products that are informed by behavioural insights and tailored to their needs. For most consumers, products should be simple, transparent, and easy to understand-particularly when it comes to trade-offs like safety versus potential returns or liquidity versus long-term gains. We also need to improve financial advice, as this will not only build consumer trust but also foster a more inclusive financial culture.

I need to stress the point that fairness and inclusiveness must remain priorities at a time when the industry is increasingly coming to rely on technology. Algorithms, AI-driven tools, and digital platforms offer great potential but also pose risks of inadvertently favouring certain groups or creating unfair barriers to access. We must ensure the fair use of technology to support a market that benefits all consumers.

If we want consumers to move their savings from bank accounts to more productive investments, including insurance products, we must also be able to address issues for consumers when they materialise on a cross-border level. This means two things.

First, mechanisms at the EU level must exist to handle cross-border supervisory concerns that cannot be addressed at the national level. In this regard, I strongly believe that EIOPA, through its Board of Supervisors, must have the ability to intervene in cross-border cases that remain unresolved due to inaction by a national supervisor. To intervene effectively, EIOPA should be equipped with the same powers as a national supervisory authority, to be used as a last resort and following the agreement of the EIOPA Board of Supervisors. Such supervisory powers would protect consumers and the well-functioning of businesses.

Second, and equally important, is the harmonization of Insurance Guarantee Schemes. In Europe, insurers can operate with one license across twenty-seven Member States; however, consumers are protected in twenty-seven different ways. In other words, we have created a single market for insurance but not yet one for consumers.

…being adaptive and data driven

The fourth imperative I mentioned at the start is being adaptive and data driven. Technological change is already here, transforming our lives and business models, and more is on the way. The insurance and pensions sectors, as well as we as supervisors, must be ready for these changes-whether in managing risk, delivering products, or communicating with consumers.

Moving forward, being data-driven is essential. We face data gaps on several fronts that must be addressed. Better data is crucial to assess risks, understand protection gaps in pensions and insurance, and raise awareness about them. It also allows us to evaluate the effectiveness of our measures in narrowing protection gaps.

We must ensure that the data we collect captures the right information and supports meaningful insights, enabling us to monitor and address risks effectively. Initiatives like EIOPA's Natural Catastrophe Hub, which provides open data, show how sharing and leveraging data can benefit the entire industry.

…being smart and efficient

This bring me to my fifth and final imperative: to be smart and efficient, and to focus on reducing regulatory burdens without compromising the quality or utility of data. This starts with streamlining reporting requirements. EIOPA is actively working to reduce the reporting burden through initiatives like simplifying guidelines, developing a common data dictionary, streamlining data collection, and refining reporting and disclosure frameworks. These actions reduce the burden on industry players while ensuring that what we collect is impactful and meaningful.

Efforts to reduce burden should go beyond piecemeal cuts. We need to address the root causes of complexity in regulations, which often result from trying to accommodate too many interests or from combining too many activities under horizontal legislation. Smart regulation must consider both implementation and enforcement from the outset, balancing EU and national perspectives while ensuring clarity and consistency.

Data sharing also plays a key role in improving efficiency. We need to explore sharing some of the data we collect with other entities, for example, other EU institutions. This would help them carry out their mandates and reduce the need to collect the same data from the same sources, further easing the reporting burden.

Likewise, we need to explore more ways to make certain data we collect publicly available. EIOPA's Natural Catastrophe Hub is one example of open data that can benefit the entire industry. There may be others.

Ultimately, we need to strike a balance between reducing regulatory burdens and ensuring we have the data necessary to monitor and address risks.

Doing it together

Ladies and gentlemen, the five imperatives I have outlined-being robust and resilient, living our purpose to protect, ensuring fairness and inclusiveness, being adaptive and data-driven, and striving for smart and efficient practices - they must become practice. The EU's progress has always been built on cooperation, the Board of EIOPA has always built on cooperation, and I believe that through continued collaboration, we can achieve this together.

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In closing, I would like to reiterate that EIOPA stands ready-as an authority, supported by a community of 27 National Competent Authorities-to implement and enforce where needed and to flag areas requiring further action that are not within its current mandate.

EIOPA stands ready as the consumer protection authority, ensuring fair value for money and fostering inclusion.

EIOPA also stands ready as the hub for insurance and pensions data, sharing insights where possible, leveraging new technologies, and engaging in dialogue with all of you.

And EIOPA stands ready as the authority for effective prudential supervision, ensuring consistency and fostering convergence.

If we focus our efforts in the areas I described, the benefits will extend to insurers and consumers alike, enhancing the competitiveness of the EU as a whole.

Competitiveness should be about the EU coming together and speaking with one European voice and standing strong in the world, not about the twenty-seven competing with each other.

EIOPA will continue to maintain trust in the system through sound, evidence-based supervision, which helps companies make full use of the single market and ensures consumers can trust and safely invest their savings.

Insurance is about assessing and managing risks for everyone's benefit. We are here to support this mission, addressing the challenges ahead together.

Thank you.

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