Annual Meeting of the Italian Association of Insurance Companies

Authorities, ladies and gentlemen,

I would like to thank President Liverani for inviting me to speak at this meeting, which is an important opportunity for discussion between the insurance industry, institutions, and the supervisory authority.

Just a few days ago, in my remarks on IVASS's activities, I highlighted how, in a context marked by profound transformations and growing uncertainties, companies can play a vital role in supporting investment and economic development.

The Retail Investment Strategy, or RIS¹, one of the European initiatives aimed at stimulating investment, is particularly important for the insurance sector. The process of adopting the new rules is in its final stages², and implementation work at European level will soon begin. The objective of the RIS is to increase the participation of European households in the capital market, which is still limited today.

While European private savings are plentiful, they are struggling to flow into productive investments. As a result, savers are not benefiting from the higher returns offered by capital market instruments, even when these align with the investment's underlying objectives in terms of time horizon and risk appetite.

To achieve this goal, the RIS provides for a review of the rules on the distribution of financial and insurance products, mainly through the introduction of the principle of adequate value for money, which requires manufacturers and distributors to ensure that products offer an adequate cost-benefit ratio. The RIS will lead to a review of the rules on incentives for distributors³; the improvement of pre-contractual information; the promotion of more transparent and customer-oriented advisory models; strengthened supervision; greater use of comparisons to assess product costs and returns.

The Italian insurance market is not unprepared for these measures. As early as 2024, IVASS, following up on the work initiated by EIOPA, published a letter to the market clarifying the Institute's expectations regarding the concept of value for money for insurance-based investment products.

After two years, we know that companies have devoted attention and resources to these issues, strengthening the consistency between product features and customer needs. In several cases, they recognised that there was room for improvement in the value for money of certain products, modifying them in some cases and removing them from the market in others. In general, we have seen greater attention paid to the level and structure of costs throughout the duration of the contract.

We must therefore continue in this direction. Simpler and easier-to-understand products, accompanied by sound advice to citizens and businesses from intermediaries, can help expand the national insurance market, to the benefit of the industry and customers.

Supplementary pensions and supplementary healthcare - The challenges posed by demographic dynamics will require an increasing share of savings to be directed towards forms of long-term investment and protection in the areas of pensions and health.

Italy is among the oldest countries in Europe. The birth rate is among the lowest and the working-age population is gradually decreasing. In the absence of mechanisms capable of compensating for this effect, it is bound to constrain economic growth and increase the pressure on public finances, including due to the increase in health and pension expenditure in the medium to long term. These dynamics suggest a review of supplementary pension and healthcare measures.

The latest budget law introduced measures aimed at expanding the number of people taking out supplementary pension schemes, promoting the full portability of individual positions and competition between operators, and allowing greater flexibility in the way benefits are provided. This should result in a more flexible, competitive system that is geared towards the needs of workers⁴.

The reform represents a challenge and an opportunity for insurance companies. On the one hand, the full portability of individual accounts reduces the mobility constraints on members and increases contestability for them, thereby intensifying market competitiveness. On the other hand, the increased complexity of pension choices heightens the importance of insurance and financial advice, thereby enhancing the role of distribution networks. In addition, synergies could be generated between pension purposes and insurance protection in the products offered (for example, through longevity risk coverage). The insurance industry will be successful if it can offer products at low cost and leverage its distinctive skills.

The ageing of Italian society also implies an increase in the demand for healthcare and health protection. For this reason, the pressure on the national health system - a universal service that represents an achievement of our society - is expected to intensify in the future.

Supplementary healthcare, in its various forms, can contribute to reducing the gap between the demand and supply of healthcare services, within a framework of forms of collaboration between public healthcare and private coverage structured in such a way as to preserve appropriate incentives for all parties involved⁵. This component of overall healthcare expenditure is still limited. On average, in recent years, about 75 per cent of total healthcare expenditure has been borne by the national healthcare system, with 21-22 per cent reflecting expenditure that citizens pay out of their own pockets. Only about 3-4 per cent has been expenditure mediated by health insurance policies and funds.

Unlike the supplementary pension system, where there is a well-defined set of rules and controls, supplementary healthcare does not have a comprehensive framework in terms of transparency, soundness and conduct for the distribution of products and services.

Indeed, various players operate in supplementary healthcare - insurance companies, health funds and mutual benefit societies - which differ from one another in terms of operations and regulatory requirements. From our supervisory activities, we note that consumers have difficulty perceiving the differences between these different entities and between the different disciplines and forms of protection provided for by the legal system. We receive complaints referring indiscriminately to insurance undertakings, health funds and mutual benefit societies. This indicates that users are not aware of the fact that funds and mutual societies are not subject to the Institute's supervision, nor are they required to have offices dedicated to handling complaints.

We have presented our reflections on these issues in Parliament⁶, expressing the hope that a comprehensive reorganisation of the matter can be achieved with the contribution of all parties involved. It will first be necessary to define the scope of the different forms and methods in which supplementary healthcare is provided, together with the nature and limits of the entities that can operate in this field, and then to identify, according to the principles of proportionality, the organisational and capital requirements of these entities and the supervisory system to be put in place.

Simplification - In the ongoing finalisation of the Solvency II revision, particular attention has been paid to the principle of proportionality. Drawing on experience from the banking sector, a new category of small and non-complex insurance companies has been introduced, which will benefit from less stringent requirements. Various simplification measures will also be available to other companies, subject to approval by the competent national authorities.

There has also been a significant reduction in reporting requirements. It is estimated that quarterly reporting will be reduced by 26 per cent for all companies, and by 36 per cent for small and non-complex companies. Even higher figures would be recorded for annual reporting. Work is also underway to streamline and simplify the recommendations addressed by EIOPA to companies, which should make it possible to eliminate about a quarter of the current recommendations.

The RIS is also moving in the same direction. There will be a new pre-contractual information framework for certain customer groups and simplified suitability tests for specific product types. The aim is to dematerialise pre-contractual and contractual documentation.

The transposition of the RIS may also be an opportunity to initiate a process of streamlining primary legislation on distribution. This work will be able to address the framework of obligations for distributors and verify the consistency of the current regulatory framework with the transformations that have affected the sector in recent years as a result of technological progress and the emergence of new operators and forms of cooperation. We will discuss with trade associations representing market participants and consumers to gather any proposals and analyses.

The industry's need to reduce the number of recommendations and disclosure requirements is one that IVASS shares and intends to pursue. However, we are convinced that the real test of simplification will be passed if, in the future, legislators and supervisory authorities manage to limit the number of new rules, obligations, and requirements imposed on companies. To achieve this, the authorities need to change their operating procedures, but the insurance and financial industry must also make an effort to improve its corporate governance practices and pay greater attention to customer needs.

* * *

As I mentioned in my remarks a few days ago, IVASS has begun to define a new strategic plan. I have outlined some issues that will certainly be part of it, from those of European origin to national ones that show signs of becoming outdated.

On all issues that are likely to influence the operation of the insurance system, we intend to promote a process that includes opportunities for consultation with industry operators, their associations and consumer representatives. For some specific issues, such as the possible completion of the framework on catastrophe risks, we will propose the establishment of joint technical working groups that can develop proposals and impact analyses. To encourage a gradual increase in insurance companies' exposure to private equity and venture capital funds, it is useful to strengthen collaboration between the various players in the industry: funds, institutional investors, public operators and businesses. Today, the limited involvement of institutional investors and the small size of the market reinforce one another, holding back the sector's growth.

We are convinced that discussion helps to identify the most effective solutions in such a complex context. I would like to thank ANIA and all the players in the national insurance sector in advance for the contribution they will make.