Republish from the special edition of Nextdeal (Issue 560)

By Stavros Konstantas, Director, Directorate of Occupational and Private Insurance Supervision, Bank of Greece

Insurance industry news is increasingly gaining prominence on both the domestic and international economic and social agenda, highlighting the importance of the role of Private Insurance in a structured society of the Western world, such as the Greek one. Going through the challenges faced by the Private Insurance market over the last decade, it is easy to understand the magnitude of the effort made and the substantial results achieved.

The initial adaptation to the demanding European Supervisory Framework of Solvency II in 2016, the management of the pandemic's impact in 2020, the response to unpredictable natural phenomena, but also the intense economic fluctuations of the past decade are just some of these challenges. At the same time, in recent years, the Greek insurance market successfully managed its broad transformation due to successive mergers and acquisitions.

A significant challenge, however, common to both the Private Insurance market and the Supervisory Authority, is the integration of the upcoming revision of the European Supervisory Framework "Solvency II". The initial implementation of this demanding supervisory framework for insurance and reinsurance undertakings, in 2016, included a review process after a reasonable period. The revision was initiated with an opinion by the European Insurance and Occupational Pensions Authority (EIOPA) in 2019 and, after consultations, it led to the publication of the revised Directive in January 2025.

This revision was an opportunity for improvement for both consumers and the insurance market at a European level. The co-legislators, the European Parliament and the Council, have already reached an agreement on the Level 1 text, while the Level 2 technical details are already being developed by the European Commission and EIOPA. The proper design of the Technical Standards will enhance the investment capacity of insurance undertakings, ensuring their competitiveness and maintaining a high level of protection for policyholders.
More specifically, the new framework enhances the proportionality, sustainability and stability of the insurance sector in the EU by reducing supervisory requirements and administrative burdens for small and non-complex undertakings, while simplifying procedures and reducing the frequency of reporting. Additionally, incentives are introduced to create surplus own funds, aiming to improve competitiveness and risk-taking capacity. At the same time, cooperation between supervisory authorities on cross-border activities and group management is promoted. New levels of requirements are introduced to address risks, such as liquidity and sustainability plans, while climate scenarios are added to the Own Risk Solvency Assessment (ORSA). The revised framework enhances the adaptability of undertakings and supervision to current and future challenges in the insurance sector.

In parallel with the changes introduced by “Solvency II” review framework, the insurance market is required to comply with the requirements of the Insurance Recovery and Resolution Directive (IRRD). Targeting at protecting policyholders and ensuring financial stability in the European Union, the new Directive mandates the obligation for insurance undertakings to prepare recovery plans and, respectively, the obligation for supervisory authorities to develop resolution plans for insurance undertakings. Additionally, further supervisory tools will strengthen the role of supervisory authorities in the implementation of resolution measures. The implementation of these regulatory frameworks enhances the flexibility and resilience of the sector, allowing insurance undertakings to address increasing challenges and risks, while at the same time strengthening the protection of policyholders and market confidence.

For 2024, the key basic insurance figures of insurance undertakings based in Greece were more than satisfactory, confirming the capital adequacy of the market. The total assets of insurance undertakings supervised by the Bank of Greece (BoG) amounted to €21.2 billion, (€7.5 billion of which were invested in government bonds and €2.9 billion in corporate bonds), while total liabilities amounted to €17.5 billion, with total technical provisions amounting to €15.8 billion.

Own funds amounted to €3.8 billion, with the total Solvency Capital Requirement (SCR) at €2.1 billion (with total eligible own funds of €3.7 billion) and the Minimum Capital Requirement at €0.7 billion (with total eligible own funds of €3.4 billion). Accordingly, the SCR coverage ratio stood at 173% and the MCR coverage ratio at 455%.

Back to the challenges of the next day, a priority for the Bank of Greece is monitoring the value-for-money of investment insurance products and enhancing consumers' understanding of the associated risks. In cooperation with EIOPA, supervisory tools are being developed to prevent unfair practices by insurance undertakings and intermediaries. The complexity of the products requires continuous monitoring by undertakings to ensure quality, while the supervisory authority focuses on consumer protection.

However, addressing the insurance protection gap is a long-standing challenge for the insurance market, as it affects not only uninsured citizens but also the overall economic resilience of the country. When the effects of low insurance penetration are combined with the consequences of climate change, the importance of the insurance market's role in addressing risks from natural disasters proves apparent.
Among the challenges of the next day is the digital transition of the insurance market. The penetration of insurance undertakings into new products and new markets is linked to continuous technological developments, so that by improving their operations and products, they enhance their competitiveness in the market. Through Artificial Intelligence and Big Data, insurance undertakings improve risk assessment and develop innovative products that respond to the changing needs of society. The use of advanced technological tools leads to more efficient pricing, reduced operating costs, and limitation of insurance fraud, while also providing a higher level of service to policyholders. In the context of technological issues updates and the risks related to information system security, the implementation of the European Regulation DORA is also included. Since January 2025, the European DORA Regulation has been in force, imposing strict requirements for digital operational resilience in the financial sector. Insurance undertakings, from now on, are required to systematically manage the risks of their information systems, address technological incidents, and conduct resilience testing to ensure, even in times of crisis, the safe and effective operation of their systems.

The Greek Insurance Market is going through a period of significant challenges which, however, also offer opportunities for innovation and growth. Adapting to new regulatory requirements, recognizing the importance of digital transition, effective risk management and human resource training are some of the crucial steps for the sustainable development of the sector. Insurance undertakings that will successfully adapt to these challenges will be able to emerge as leaders and offer strong solutions for the Greek economy and society. In this direction, the Bank of Greece will continue to work tirelessly so that supervised entities and consumers feel and, above all, are safe.

Read below the article from the special edition of Nextdeal (Issue 560) in electronic format, page 13 (click bottom right to enlarge)