François Villeroy de Galhau: Insurance and pensions – institutional innovation, economic innovation, technological innovation Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the7th annual EIOPA Conference, Frankfurt am Main, 22 November 2017. * * * Ladies and Gentlemen, It is a pleasure to be in Frankfurt today for this 7th Annual EIOPA Conference and I wish to warmly thank EIOPA’s Chairman Gabriel Bernardino for his kind invitation. I must say that I feel at home, since we are not far away from the ECB building where I take part in the meetings of the Governing Council at least every two weeks. But today I will speak in my capacity as President of the French supervisory authority, the Autorité de Contrôle Prudentiel et de Résolution (ACPR), which belongs to the board of supervisors of EIOPA, and which is in charge of the supervision of both insurance companies and banks in France. This is an important responsibility as the French insurance market is the second largest in the European Union, just behind the United Kingdom, with an aggregated balance sheet of approximately EUR 2,600 bn. Given that I am speaking before the panel dedicated to innovation, I will take this opportunity to focus on three kinds of innovation, which in my view can lead us to rethink insurance and pensions: institutional innovation, economic innovation and technological innovation. 1. Institutional innovation Let me start with institutional innovation.
In line with this principle, the validation of internal models, for instance, should preferably remain the responsibility of the NCA in order to reflect the close link between this decision and the on-going dialogue that takes place between the insurer and its national supervisor; EIOPA for its part could concentrate more efficiently on the essential task of enhancing the harmonisation between national practices. In addition to these desirable adjustments of the European institutional framework, there is a need to make concrete progress towards a European resolution mechanism, which would provide more adequate tools to limit the impact of an insurer failure and increase trust and confidence. France has been working along these lines at national level and such a mechanism will be in place in our country before December. 1 The French resolution insurance regime requires insurers of a certain size to set up preventive recovery plans, which will form the basis for preventive resolution plans. Moreover, the ACPR is entrusted with several powers to be used in a resolution context, such as the possibility of appointing a resolution administrator in the insurance undertaking, limiting the distribution of dividends, or organising portfolio transfers to another insurer. 2. Economic innovation Let me now turn to my second point: economic innovation. As Europe’s economy is close to the “technological frontier”, businesses need to innovate more. As such, they need to be able to take more risks, which requires more equity financing, over the long term, rather than debt financing.