10 years of Solvency II equivalence: Europe can be open without lowering its standards

As Europe explores new avenues for enhancing its competitiveness without compromising the regulatory standards it has built up over the past two decades, the debate over financial services risks being narrowed down to a choice between upholding high regulatory standards and embracing greater regulatory openness.

Ten years of Solvency II equivalence indicate otherwise.

The insurance sector is a fairly successful but underappreciated example of an alternative approach that could become increasingly relevant in other areas of financial regulation. The EU can maintain its own prudential objectives while acknowledging that another jurisdiction can achieve comparable outcomes through different rules, institutions and supervisory practices.

Solvency II equivalence puts this principle into practice. It doesn’t give third-country insurers a passport into the Single Market. Instead, it allows the EU to rely on another jurisdiction's regulatory and supervisory framework where comparable outcomes exist.

Apostolos Thomadakis is Head of Research at ECMI, and Senior Research Fellow and Head of the Financial Markets and Institutions Unit at CEPS. This ECMI Commentary summarises the key findings of a longer CEPS-ECMI report which you can find here.