The new provisions mandate insurance companies to effectively consider risks associated with sustainability. Credit: Steve Buissinne from Pixabay.

The EU has agreed on a deal to alleviate capital rules that regulate the insurance sector, known as Solvency II rules.

The move is expected to release tens of billions of euros for investment in green technology and infrastructure, fostering growth.

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Member of the European Parliament (MEP) Markus Ferber led negotiations on behalf of parliament, and the deal has been signed between member states represented by the Spanish EU Presidency and MEP negotiators.

The amendments could allow additional investment of €99.67bn by the insurance industry into the economy, equivalent to around 0.6% of the EU’s gross domestic product.

It also includes new provisions mandating insurance companies to effectively consider risks associated with sustainability.

The companies will also be required to report on these risks and provide clear understanding of a company’s green credentials to the policyholders.

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Ferber said: “Due to the existing rules, European insurance companies have been forced to hold hundreds of billions of euros in excess capital above the minimum reserves. With today’s agreement, we release a meaningful amount of capital that can flow into productive investments such as green infrastructure and digitalisation.

“For the Green Deal to succeed private investment is needed. The review we agreed allows insurance undertakings to play their part without putting policyholders at risk. The review also enables insurers to make more long-term investments, which will ultimately benefit policyholders.”

In a press statement, EU parliament’s economic affairs committee said: “The main aim of the review of the Solvency II directive is to strengthen European insurers’ contribution to the financing of the recovery, progressing on the Capital Markets Union and the channelling of funds towards the European Green Deal.”

A deal on a new recovery and resolution directive is due to be signed following the completion of talks between negotiators on the second chapter of the reform of the insurance sector’s regulatory architecture.