“Die Deutschen sollen's richten” (The Germans have to sort it out) claims the German weekly “Zeit online” – and that’s what they have in mind judging by the presidency programme, where the priority issue of the pending EU budget including the recovery fund features prominently.
From a German insurance perspective, there are three key issues:
I believe that economic incentives are needed to promote a more sustainable economy as Europe gets back to business post-crisis. The EU’s sustainable finance strategy should focus on exploiting market forces accordingly. The first step should be mandatory pan-European carbon dioxide pricing based on the polluter pays principle. Furthermore, companies should be given the scope they need to make their processes and product offers more sustainable. Additional disclosure requirements and specifications often won’t lead to increases in urgently needed climate protection and sustainability investments, but tend to cause information overload and lower customer returns. It is therefore imperative to avoid excessive regulation and bureaucracy. The European Union should focus on creating sustainable projects instead and making them attractive to private investors by ensuring the right framework conditions are in place, such as an intelligent development bank policy or a deepening of the capital markets union.
Capital Markets Union
Speaking of which, we have to complete the Capital Markets Union. We have made progress, but we need to go a lot further. The fragmentation within the financial market would cease to be an issue with improved capital flows within the currency area. Another benefit would be a reduced dependency on the controversial fiscal balancing mechanisms in the eurozone. Brexit also adds relevance to the capital markets union. Such a development would entail insurers assuming a bigger role in financing the real economy. We are ready to take on this responsibility and we need more infrastructure investment opportunities to do that. Public-private partnerships enable the cost-efficient and, most of all, fast provision of sustainable infrastructure. Speed is a valuable asset given the rapid advance of climate change. The conditions are right: the European Union, German federal government and Länder are finally ready to invest billions in sustainable and digital infrastructure projects to kick-start the economy and move on from the crisis.
We now have excellent prospects of creating a single digital market to remain internationally competitive. We need a uniform, suitable regulatory framework to promote innovation in the interests of consumers and the economy. Fair, transparent, free of discrimination – and with a view to the potential. The example of artificial intelligence (AI): we insurers support the EU Commission's plan to leverage the enormous potential of data and algorithmic systems for sustainable growth and social welfare in Europe while taking sufficient account of potential risks at the same time. The recently published Commission White Paper addresses the risks and opportunities of AI. The main consideration from our side is to avoid hampering or delaying the benefits of the new technologies through overregulation.
Insurance doesn't need any more regulation of the type being planned by the Commission for high-risk AI applications. As a part of the financial sector, the insurance industry is already heavily regulated. New technologies or methods such as AI are already covered by current legislation and the supervisory authorities are continuously refining their respective policies with regard to new technologies.
When it comes to supervision, both the European and German supervisory authorities have already strengthened their regulatory endeavours in this area. The technology-neutral rules that apply to the analogue insurance world automatically extend to the digital domain.
Double regulation is to be avoided at all times, including for this new area.
Jörg von Fürstenwerth