Toespraak van minister Dijsselbloem bij de conferentie van deInternational Association of Insurance Supervisors

Toespraak | 23-10-2014

Ladies and gentlemen,

It's truly a great pleasure to meet you all here in Amsterdam. Home to the Dutch central bank DNB, our host today. The bank is celebrating its 200th birthday this year. Joanne (Kellermann), allow me to thank you for your hospitality and congratulate you on our 'birthday bank'. Let me also take this opportunity to congratulate the IAIS on its 20th anniversary. Amsterdam is better known as being home to The Night Watch. You have probably heard of or even seen the famous work of art by Rembrandt, one of our finest painters. Did you know that The Night Watch is so unique and irreplaceable that it cannot be insured?

So I'm sorry to say that Rembrandt's major work hasn’t provided much business for the insurers among us. But another famous Dutch painter has. I'm talking about Vincent van Gogh. In 1990 the great Van Gogh exhibition here in Amsterdam was insured for roughly five billion dollars. So it wasn't just a remarkable exhibition, marking the centenary of Van Gogh's death. It was also the insurance deal of the century. A deal that involved 300 insurance companies worldwide. Maybe some of you even contributed to it back then.  Of course insuring something as big as the Van Gogh exhibition is the domain of the ‘special cases division’. The same part of the insurance business that takes care of the smile of Julia Roberts, the legs of Cristiano Ronaldo and the middle finger of Keith Richards.

Of course most people, myself included, have more everyday insurance policies. For our cars, which take us wherever we want to go. For our homes, where we come together with our families. For our health, which keeps us going. And finally: for our lives themselves.

This is what insurers do: they calculate what is most precious to us and then attach a price to it. And by doing so insurance companies bring order to our society. By pooling risks, insurers offer security to individuals and make life more predictable for businesses. In return for a premium they provide a safety net, enabling people to spread their wings. Just in case they risk hitting the ground. Of course, the strength of the net determines the level of safety offered. But over the past few years it has become clear that the insurance world itself was not strong enough to resist the blows it received during the financial crisis. The crisis hit insurers hard, but unevenly.

The ones that extended their operations into risky financial areas were hit directly. Others were hit indirectly because the value of their assets eroded. Especially life insurers, when interest rates fell due to monetary expansion. And of course this jeopardised the safety net I've just mentioned. During that crisis, governments in many parts of the world had little choice but to support financial institutions with tax payers' money on an unprecedented scale. The crisis made it crystal clear for everyone that financial institutions need larger financial buffers than before 2008.  Here in Europe we have improved financial regulation and supervision. We took meaningful steps towards European integration. Not only to break the vicious circle between financial institutions and governments and protect tax payers. But also to get credit flowing again.

We set up the European Banking Union that makes it possible to wind down failing banks in an orderly manner, without presenting the bill to the taxpayer. The European Central Bank will supervise directly 120 banks from next month onwards. These banks represent 85 percent of the total banking assets in the Banking Union. You probably know that the European Central Bank is presenting the result of a rigorous test of banks’ balance sheets in a few days time. Banks had to increase their buffers and to restore their position in the real economy. As for the insurance sector, the financial crisis also highlighted the importance of prudent risk-taking. Because the crisis showed that the best-performing insurers were well capitalised, held high quality capital and did not extend their businessinto risky areas of structured finance.

So, for insurance companies we will introduce a modern risk-based system: Solvency II. At the start of 2016, European insurers will have to comply with these new rules. Solvency II improves the financial health of insurers. In particular their resistance to financial shocks, with a harmonised set of accounting and capital rules at European level. And with requirements for insurers to hold capital based on the risks they face and the way they manage these risks. These measures have been carefully crafted and intensively tested.

You will of course agree that good regulation is just the first step. The next is ensuring that Solvency II is implemented consistently throughout the European Union. Here the European Insurance and Occupational Pensions Authority – or EIOPA – comes into play. It will have an important role in the promotion of supervisory convergence and the establishment of a common supervisory culture in Europe. This will for example be done by participating in colleges of supervisors, the development of a supervisory handbook and the adoption oftechnical standards. You will witness intensified cooperation between supervisors from 2016 onwards, in particular in the monitoring of insurance groups.

Now, I realise that you may wonder what these European developments mean for the worldwide work of the IAIS. Allow me to explain. The IAIS plays a crucial role in the supervision of the insurance industry. Over the past few years the IAIS has been granted important new tasks. For example the development of a method to identify the insurers that are important for worldwide systems. And also taking measures to address risks within these institutions. We’ve learned that large insurance groups have become very complex and interconnected with other financial institutions and markets. So worldwide cooperation is necessary for effective supervision. In short: the EU has a clear interest in joining forces with its partners from around the world.

That brings me to my conclusion. I call upon the IAIS to build on the work done in Europe. We would like to share our experience with the rest of the world. We will deliver a modern, risk-based set of harmonised solvency rules that replaces the current piecemeal system. It will pave the way for a single, unified regime and a distinct EU supervisory culture. So the EU should no longer be seen and treated as 28 individual supervisory regimes, but as a single jurisdiction that provides efficient and effective supervision.

Ladies and gentlemen, I have just outlined the improvements we made in Europe in response to the financial world’s troubles in recent years. I’m aware that the worldwide economy is not yet stable. The constantly changing world we live in will never stop providing new challenges. In my view that should be an even greater incentive for us to continue the general approach we’ve chosen of less risk-taking and more prudence.

One more thing.

At the start of my speech I mentioned The Night Watch of Rembrandt. Did you know that while Rembrandt was creating his magnificent paintings in the 17th century, a Dutch statesman was writing a book about the use of age-dependent survival rates? This man, Johan de Witt, developed an accurate way of calculating life annuity premiums. And as the light in Rembrandt’s paintings still illuminates us, so does De Witt’s book. His ideas are still meaningful today. For many in the insurance world it has been valuable to build on his work. In a somewhat similar vein, I hope that the IAIS will build on the work and experience of the EU with respect to Solvency II. A system that clearly introduces modern, risk-based supervisory rules. A system that has been carefully crafted and tested. And a system that will no doubt be a subject of your discussions during this conference.

Thank you.