Regulation With The Consumer in Focus

Danish consumers must be able to rely on their pension savings being invested in a responsible manner so that consumers upon retirement get what their pension projections have indicated. It is therefore important that the insurance and pension industry have the funds necessary to withstand financial crises and setbacks while still being able to meet their obligations.


Danish insurance companies and pension funds are regulated by the Solvency II directive, which was introduced in 2016. The solvency level in Denmark is one of the highest in Europe. This entails a high degree of consumer protection.


The right balance between solvency requirements and growth

It is important to strike the right balance between, on the one hand, securing a high level of solvency and, on the other hand, giving the insurance and pension industry freedom to invest the pension savers money in a way that gives the highest rate of return possible. If solvency requirements are strengthened further, it could have consequences for the industry’s ability to invest in sustainable transition, infrastructure and growth creating projects.


Solvency II review in 2020

Solvency II requirements were introduced in 2016 and will be reviewed in 2020. Preparations for the 2020 review are already well underway. The purpose of the review is to evaluate the extent to which the solvency requirements function as intended, keeping in mind that pension fund investments are long term in nature.


One of the priorities for IPD is that the Solvency II requirements become more proportionate, so that smaller Danish pension funds are not worse off compared to large European pension funds. New regulation and tougher demands to reporting tend to be much more expensive for smaller companies to implement. This must be addressed as part of the Solvency II review.


The Danish insurance and pension industry has always supported a high level of consumer protection and financial stability, which in part are due to the Solvency II requirements. However, it is important to strike the right balance. Tougher solvency requirements in the future can hinder long term investments, job creation and economic growth.


Positions of IPD

The upcoming Solvency II review in 2020 must include focus on:


Reducing the current complexity and not introducing tougher solvency requirements than those already in place. Too high solvency requirements will reduce the industry’s ability to undertake long-term investments.


Promoting greater proportionality, thereby protection the industry against “one size fits all” regulation. This type of regulation might suit the largest European companies, but is a challenge for smaller Danish companies.


Solvency requirements being established solely on the technical evaluation of potential risk, rather than political desires which might result in artificially lower solvency requirements for e.g. green investments. Risk is risk, no matter the type of risk in question.


Jenny Maria Thers Rée

Senior Consultant, Actuary
+45 41 91 90 90