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A Cross Border Insurance Market

Danish insurance companies operate in an open and integrated European insurance market.

Related to: Politics
Published 13.09.2023

Danish insurance companies operate in an open and integrated European insurance market. The internal market creates good conditions for competition within the EU, which in turn encourages an effective and innovative insurance market to the benefit of consumers.

The internal market gives insurance companies the opportunity to establish agencies in different countries and sell insurance products across borders. Whilst this is generally to the benefit of consumers, it is at the same time important to ensure a uniform enforcement of EU regulation.

Bankruptcies in Denmark

In Denmark we have in recent years experienced three insurance companies going bankrupt. One company was based in Lichtenstein, while the other two were based in Denmark. All three companies had limited activity in their home country and sold a large amount of insurances abroad. These bankruptcies had great consequences for the insurance customers directly involved. However, other insurance customers are also affected, as they experience the price for their insurances increase, reason being that they pay a smaller, added amount into a guarantee fund.

Insurance & Pension Denmark believes that there is a great need of uniform enforcement of EU legislation across Europe, in addition to a common European standard for the National Supervisory Authorities. Consumer protection depends on a well functioning and well coordinated supervisory system in Europe.

Supervisory authorities in Denmark and the EU

In Denmark our National Supervisory Authority is responsible for supervision of financial institutions. At EU level, The European Insurance and Occupational Pensions Authority (EIOPA) establishes standards o how to carry out supervision in the member states.

Insurance & Pension Denmark believe there is a need for greater cooperation between the different European supervisory authorities. Stronger cross border cooperation between national supervisory authorities in Europe with companies that sell insurances across borders will play an important role preventing future bankruptcies. Cross border cooperation between national supervisory authorities can be in the form of establishing common supervisory platforms, coordinated by EIOPA.

It is important that consumer protection does not stop at the border, given that insurances are sold across borders. Cross border cooperation is necessary to avoid insurance companies going bankrupt in the future.

European guarantee funds based on the Danish model

Regardless of financial legislation and supervision, there is always the danger that an insurance company might go bankrupt. In such cases, it is important that consumers are protected. In Denmark, we have a national guarantee fund for non-life insurance companies.

As part of the upcoming Solvency II review in 2020, EU is planning on introducing minimum harmonization of national guarantee funds. Given that we in Denmark have a well functioning guarantee fund, it is important to Insurance & Pension Denmark that minimum EU harmonization does not leave the Danish consumers worse off. We strive to keep our high level of consumer protection and not passing on additional costs to the Danish consumers.

Positions of Insurance & Pension Denmark

Regarding the effort to regulate the cross border insurance market, it is the position of Insurance & Pension Denmark:

That the top priority is to improve the effectiveness of the supervisory effort and to a greater extent coordinate cooperation between the national supervisory authorities and EIOPA, e.g. in the format of common supervisory platforms.

Secondly, to help insurance companies in financial difficulties and secure consumers by introducing common standards for recovery and resolution.

That common EU minimum harmonization for guarantee funds focuses on non-life insurance companies.

Kirstine Thorsen

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Kirstine Thorsen

Senior Consultant, LL.M.