The reform of Solvency II that has now been passed was not a pre-Christmas present for the German insurance industry. Gifts were not distributed. On the contrary, the agreement between the EU Parliament, Council and Commission was simply not as bad as expected – from the German insurance industry's point of view. And that has to be said with reservations: As far as can be said so far. Because the agreement is "only" a political one, i.e. in terms of the principles. The technical agreement is still pending.

This technical agreement could still harbour a few surprises. This is because the review of Solvency II is a painstakingly detailed process with far-reaching consequences. For this reason, only rough outlines are recognisable so far, which have to be gleaned from the opinions of the Parliament, the rapporteur, the Commission and the insurance associations.

The Commission's central message is that additional long-term investments can now be made, particularly in the Green Deal propagated by the Commission, but also in the digital transformation. The Parliament gives a concrete figure: 100 billion euros. However, it is qualified that the relief provided by the reform depends heavily on the interest rate environment and the macroeconomic situation.

And what does this mean for Germany? Probably not much. The GDV insurance association expects only minor relief effects in the current economic environment. However, this could look very different in other countries. However, it is also essential to bear in mind that the capital that is freed up does not necessarily have to flow into the somewhat risky transition financing. Some insurers could also buy additional government bonds, especially if they have a capital backing of zero.

More interesting for the equity markets is the announced new regime for equity investments. Under Solvency II, shares must be backed by 39% or 49% equity, which does not necessarily make such investments any easier. This has been criticised, particularly in France, which has a strong affinity for equities. After all, long-term shares only have to be backed by 22% equity under the standard formula. In practice, this is hardly ever applied, as the criteria for this "long-term equity" are very restrictive. This is now set to change, not in the Solvency II Directive, but in a delegated act of the Commission.

The 22% has now been fixed in the directive, and a few cornerstones have been hammered in, but these are not yet known. This again shows the crux of this approach. On the one hand, it is clear that technical details such as these cannot be laid down at the legislative, i.e. directive level, or only in broad terms. It is not without reason that the review took almost three years. On the other hand, it is the details that matter here – which the Commission implements on its own initiative in delegated regulations. Lobby groups will undoubtedly try to exert their influence on the Commission. However, Parliament and the Council can only approve the regulations in their entirety – or reject them in their entirety. However, the latter rarely happens. After all, the European supervisory authorities, in this case EIOPA, still have a significant say in the implementing provisions they adopt.

Whether the reformed Solvency II regulations will also strengthen the competitiveness of European insurers and provide better protection for policyholders remains to be seen. It sounds like a lot of marketing if the aim is to do something good for the environment, companies and consumers. There is no denying that the parties involved in the agreement have pursued these intentions. Whether this will materialise will only become apparent in practice. A high output of new regulations and rules is to be expected – and a lot of bureaucracy is to be feared to comply with them. The year 2024 will show whether this proves to be the case.