In response to the increasing need for simplification of regulation and reduction of administrative burdens, the European Insurance and Occupational Pensions Authority (EIOPA) has presented its comprehensive position paper on the subject. The document attempts to strike a balance between the drive for competitiveness of the European Union economy and the need to ensure effective supervision and consumer protection.
Simplification as a means, not an end in itself
In line with the approach outlined, regulatory simplification should not be seen as a stand-alone objective, but as a tool to achieve a broader objective – to build a more resilient, stable and competitive European economy. EIOPA stresses that regulatory simplification can play a key role as a catalyst for economic growth. However, these measures need to be well thought out and consistent with the EU’s long-term integration goals.
Harmonised and smart regulation – responding to the risks of fragmentation
The Authority points to the need for an integrated approach to regulatory reform. The aim should be to strengthen a consistent regulatory framework across the EU by eliminating unnecessary divergences between Member States. The EIOPA warns that simplification cannot be reduced to a mechanical abolition of requirements – it must avoid a situation where restrictions at EU level are offset by new obligations introduced at national level. Such actions would lead to further fragmentation of the single market and the creation of barriers for businesses operating across borders.
Balancing simplification objectives with the need for effective supervision
EIOPA particularly emphasises that the simplification process must not be at the expense of supervisory efficiency. In this context, the Authority announces a detailed analysis and assessment of the necessary data used in daily supervisory work. The aim is to optimise the data collection process and reduce its burden on supervised institutions, while maintaining the high quality of information necessary for risk assessment and financial stability.
Specific actions under the EIOPA mandates
In practice, EIOPA is already undertaking a number of initiatives to implement simplification principles in its areas of competence. Among the most important are:
· Shortening and standardising Solvency II guidelines to increase transparency and reduce redundant documentation,
· Reducing the number of data points in supervisory reports, which reduces the administrative burden for insurance companies,
· Introduce proportionality rules so that smaller entities are not subject to the same stringent requirements as large financial institutions,
· Reduce the frequency of stress tests, which will reduce the organisational workload on the part of insurers and pension funds,
· Simplification of requirements for the design, presentation and sale of insurance products – which is crucial from the perspective of consumer protection and market transparency.
Sustainability and simplification of ESG reporting
In response to the growing importance of sustainability, EIOPA also declares its support for the European Commission in simplifying European ESG (environmental, social and corporate governance) reporting requirements. In doing so, the authority emphasises the need to ensure access to reliable and standardised data as a prerequisite for effective climate risk management by (re)insurers and pension funds.
EIOPA’s role in shaping legislation and supervisory convergence
EIOPA notes that the simplification process should start at the earliest stages of EU lawmaking, especially for legislative acts of a horizontal nature. EIOPA’s active participation in the negotiation phase of so-called ‘Level 1’ legislation could help to better align legislation with market realities and increase its regulatory effectiveness.
In parallel, the Authority points to the need for stronger supervisory convergence. In its view, strengthening the EIOPA’s mandate – particularly in the Supervisory Board – could significantly improve the quality and uniformity of enforcement across the EU. This is particularly true for cross-border activities, where differences in interpretation between member states often generate barriers for companies.
Simplification and competitiveness: a condition for the development of the European financial market
In its conclusion, EIOPA presents a clear message – the simplification of regulation is intended to make the European financial sector more competitive, but only on condition that it does not violate supervisory principles or weaken consumer protection. As EIOPA President Petra Hielkema underlined:
“Simplifying regulation and reducing burdens is important and possible. However, it should be seen as a means to an end and not an end in itself (…). In our view, simplification efforts must strike the right balance, ensuring that streamlining leads to a stronger, more coherent framework rather than introducing new gaps, inconsistencies or unintended burdens elsewhere.”
In doing so, EIOPA takes a balanced, responsible and systemic approach – crucial in the face of dynamic geopolitical challenges and the need to maintain a coherent, resilient and fair European Union financial market.
EIOPA’s position is available here.