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Capital Markets Union: Making it easier for insurers to invest in the real economy

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The European Commission adopted today new rules to help insurers to invest in equity and private debt and to provide long-term capital financing.

The insurance industry is well-equipped to provide long-term finance by investing in equity and private debt, including of small and medium enterprises (SMEs), but the actual share of their investments in the real economy remains limited. As a result of today’s rules, insurers will have to hold less capital for such investments and will therefore find it more attractive to invest in the economy. This will further help mobilise private sector investment – a key objective of the Capital Markets Union. The newly adopted rules, which take the form of a Delegated Regulation, amend the EU prudential rules for the insurance sector, known as Solvency II, and follow up from the Mid-term review of the CMU Action Plan.

Commission Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: “One of the main objectives of the CMU is to foster economic growth in Europe by removing barriers to investment. Insurers were highlighting that some of the Solvency II rules were preventing them from investing more in equity and private debt. We have listened to their concerns. The amendments adopted today will make it easier and more attractive for them to invest in SMEs and to provide long-term funding to the economy”.

Jyrki Katainen, Vice-President responsible for Jobs, Growth, Investment and Competitiveness said:“SMEs can play a crucial role in job creation and sustainable economic growth. To fulfil that role, they need access to a broad range of financing options, including via equity and privately-placed debt. Today’s actions will allow SMEs and other companies to have better access to such financing instruments from insurers. I am confident that this change will contribute to growth and prosperity across the Union”.

Based on expert advice from the European Insurance and Occupational Pensions Authority (EIOPA) and in-depth analyses by the Commission, today’s Delegated Act lowers the capital requirements for insurers’ investments in equity and private debt, also aligning the rules applicable to banks and insurers.  

Today’s amendments also change various other aspects of the Solvency II implementing rules, such as:

  • new simplifications in the calculation of capital requirements,
  • improved alignment between the insurance and banking prudential legislations,
  • updated principles and standard parameters to better reflect developments in risk management and the most recent data (including a better treatment of financial hedging strategies).

This will improve the balance between burden and risk and ensure that Solvency II remains up-to-date.

The amendments will now be subject to a scrutiny period of 3 months by the European Parliament and the Council.

Background:

This legislation takes the form of an amendment to Commission Delegated Regulation (EU) 2015/35 (Solvency II implementing rules). Solvency II is the first harmonised, risk-based EU-wide prudential framework for the insurance sector. This amendment is part of a scheduled review of the implementing rules of the Solvency II insurance regulatory framework, which precedes a more fundamental review of the Solvency II Directive in 2020.

Several previous targeted amendments to the Solvency II implementing rules adopted between 2015 and 2018 have already contributed to the objectives of the Capital Markets Union Action Plan, and supported insurers’ investments in the real economy. In particular, in 2015 and 2017, the Commission introduced preferential treatments in the standard formula capital requirements to equity and debt investments in infrastructure projects and infrastructure corporates. In 2018, the Implementing Measures were amended to introduce more tailored capital requirements for simple, transparent and standardised securitisation.

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Ursula von der Leyen presents her vision to MEPs

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Ursula von der Leyen outlined her priorities as Commission President © European Union 2019 – EP

In a debate with MEPs, Ursula von der Leyen outlined her vision as Commission President. MEPs will vote on her nomination, held by secret paper ballot, at 18.00.

Ursula von der Leyen outlined her political priorities, if elected as Commission President, to MEPs in Strasbourg this morning.

Here is a selection of the topics she mentioned during her speech.

Having identified the collective need for “a healthy planet as our greatest challenge and responsibility”, Ms von der Leyen proposed bolder emissions targets, with a reduction of 50% to 55% by 2030 and committed to submit a plan for a “Green Deal for Europe” and a European Climate Law within her first 100 days in office. She also announced plans for sustainable European investment (also through the partial conversion of EIB funds into a “climate bank”) to provide €1 trillion in investments within a decade.

Ms von der Leyen also stressed that the EU must establish an economy that serves the people. In order for this to happen however, “everyone needs to share the burden” – including those tech giants that conduct their business (and should continue to do so) in Europe, yet do not repay the people of Europe for their access to EU human and social capital.

Reiterating her commitment for a gender-balanced College of Commissioners during her term, she also highlighted that violence against women has to be tackled decisively; she would therefore seek to define violence against women as a crime in the European treaties, in parallel to completing the EU’s accession to the Istanbul Convention.

Ms von der Leyen declared her commitment to rule of law as a European value, announcing that she intends to establish an EU-wide monitoring mechanism in parallel to existing measures. She emphasised that these European values also include a duty to save lives at sea and should translate into a humane border policy. She stated her support for a “new pact on migration & asylum” and Dublin Regulation reform, adding that she intends to ensure that Frontex border guards number 10,000 not by 2027, but by 2024, and that all countries should shoulder their fair share of the burden based on the principle of European solidarity.

On the matter of European democracy, Ms von der Leyen announced a two-year Conference for Europe as of 2020, in which citizens will take a leading and active role. She also emphasised the need for the Spitzenkandidaten system to be strengthened and that transnational lists should be reconsidered in future European elections. She also declared her full support for a right of initiative for the European Parliament, committing to put forward a legislative proposal in response to every resolution that is passed with a majority of Parliament’s constituent members.

Reactions from political groups

Manfred Weber (EPP, DE) confirmed his group’s support for Ms von der Leyen. “We stand for a Europe that is fair, modern and innovative, secure, open-minded and ecological. We will implement these pledges together with her.” He welcomed her proposals for a right of initiative for the EP and to improve the lead candidate process, saying, “Backroom deals must be a thing of the past.”

Iratxe García Pérez (S&D, ES) complained that “European democracy is progressing way too slowly” and underlined that Ms von der Leyen must give further details on how she plans to respond to citizens’ demands, and particularly youth, before the S&D decides whether or not to back her. Support for sustainable growth, stronger action to fight poverty, and a binding strategy for gender equality are essential, García added.

Dacian Cioloș (Renew, RO) said, “We can no longer disappoint the millions of Europeans who said YES to Europe. They expect the EU to defend the rule of law without hesitation”. His group is ready to support her, with one goal: the renewal of Europe. “But, above all, we expect from you real pro-European leadership. Europe is not an administration, but a political ambition”, he said.

Philippe Lamberts (Greens/EFA, BE) said that his group was not ready to hand over the helm of the European Union to Ursula von der Leyen at a time when ‘‘our common house is burning, the climate is deteriorating, there are ever deeper inequalities and a backlash in fundamental freedoms and the rule of law”. However, if elected, his group was ready to provide its support “whenever the proposals would be up to the existential challenges we face”.

Jörg Meuthen (ID, DE) announced that his group will vote against her, stating that she is unfit for the job and that she had no convincing vision for Europe. He criticised her for promising too many different, contradictory things to groups in order to secure support, e.g. regarding the rule of law or migration.

Raffaele Fitto (ECR, IT) asked Ursula von der Leyen to clarify her position on “the mechanism on the rule of law, on which we are at odds” with the policy pursued so far by the Commission. Regarding the fight against climate change, he said he was “happy for proposals such as the transition fund and the bank for sustainable investments, but we discuss increasingly ambitious targets, without saying how to achieve them”.

Martin Schirdewan (GUE/NGL, DE) said that his group will not vote for Ms von der Leyen. Voters expected a lead candidate as Commission President, he claimed, not a Minister of Defence, which is a signal “for the continued militarisation and isolation of the EU.” He called for austerity policies to end and for investment in social security, education, healthcare and fighting climate change.

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PES: Progressive commitments needed from the next Commission

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The next European Commission must commit to progressive priorities, PES President Sergei Stanishev said today.

At a hearing this morning with S&D MEPs, Sergei Stanishev asked the nominee for Commission President – Ursula von der Leyen – to commit to stronger social rights, more opportunities for young Europeans, and a firm approach to the Rule of Law.

PES President Sergei Stanishev said:“The next European Commission programme must not ignore the millions of Europeans who voted for progressive change. The public did not have an opportunity to scrutinise the current nominee’s ideas, so today we are seeking commitments on our priorities. This means binding rules for the Social Pillar, substantial budget increases for youth, and no watering down of the Rule of Law.”

The PES has been the driving force behind the European Pillar of Social Rights, working to convene the EU Social Summit, also known as the Gothenburg Summit, in 2017. The Pillar was created to strengthen rights and social protections for workers, but during the last mandate major elements of the Pillar were not implemented by member states and binding rules should now be introduced.

Opportunities for young people must also be a priority for the next Commission. The Youth Guarantee was a PES initiative to secure a job, traineeship or education place for all young people after they leave education or become unemployed. More investment is now needed to support the next generation to reach their full potential and enjoy a comfortable life. This means introducing a European Youth Plan, extending the Youth Guarantee so it can benefit more people, and implementing a European Child Guarantee. Erasmus+ must also be strengthened to ensure people from all backgrounds can benefit, and European Culture Cheques should be introduced to support access to culture for young people.

Led by the First Vice-President of the European Commission Frans Timmermans, the PES has a resolute commitment to upholding and strengthening the Rule of Law. Our political family has led the defence of this fundamental value of the EU, a collective duty for all European parties. It is important that a future Commission does not shy away from its obligations in this area. The next Commission President must build on the comprehensive work undertaken in this mandate by the First Vice-President to ensure democracy and the independence of the media and judiciary can flourish in Europe.

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Parliament decides on new Commission President

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MEPs vote on the candidate for the president of the European Commission on Tuesday 16 July.

German Defence Minister Ursula von der Leyen, who was nominated for the post by the European Council, will outline her programme and discuss it with MEPs from 9.00 CET. MEPs will vote on her candidacy at 18.00 CET.

In order to become Commission President, von der Leyen must secure the support of an absolute majority of MEPs (as of today she must get at least 374 votes). The vote will be a secret paper ballot.

Although she has the backing of EU leaders and is a member of the political party that won most seats in the European elections, von der Leyen was not a lead candidate, a fact criticised by many MEPs.

Political groups have already subjected von der Leyen to tough questioning about her plans for the Commission.

If she fails to win a majority, the European Council would have to put forward another candidate.

Following May’s elections, one of the first tasks of the new, directly-elected European Parliament is the election of the next European Commission President.

Once this new president has been approved, work starts on setting up the new Commission. Parliament’s committees will hold hearings with each of the commissioners-designate to assess their suitability for the portfolio to which they are assigned, before MEPs vote on the Commission as a whole.

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