The case for levying an Eiopa 'tax'

Chair is hopeful the European Commission may address structural problem of funding the under-resourced regulator

In laying out plans for his second term in office, Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority (Eiopa), presents a number of laudable aims. Among his headline targets are achieving supervisory convergence, enhancing consumer protection and preserving financial stability.

Along the way, over the next five years, Eiopa will of course fulfil all the other day-to-day duties one might expect of a European supervisory authority. But in an interview with Risk.net, Bernardino admits his organisation cannot hope to cover all areas of concern – hence there is a need to prioritise.

For example, Bernardino says Eiopa will conduct an analysis of the ongoing appropriateness of insurers' internal models and elements of benchmarking, but he admits: "We don't have the resources to touch on all issues." In practice, that means the regulator will tackle the elements it considers most relevant – modelling sovereign exposures will be a focus, with an analysis due this year, to be followed by policy proposals.

Originally set up in 2011 with just 20 employees, Eiopa is now staffed by around 140 people. Charged, however, with supervising insurers and pension funds in Europe that collectively manage assets in excess of €9.2 trillion ($10.3 trillion) in the eurozone alone – according to the European Central Bank – the organisation could be described as under-resourced. Its annual budget of just under €20 million certainly does not seem excessive, given the regulator's wide remit. The same could be said of its sister bodies, the European Securities and Markets Authority and the European Banking Authority.

Eiopa is currently funded 40% from the European Commission and 60% by EU member states. Bernardino thinks this is a structural problem, to be solved by financing Eiopa's activities from the central European Union budget and/or levying insurers and pension funds. After first making such a call in 2013, he is hopeful of change – with the European Commission said to be considering the issue.

Insurers and pension funds would not rejoice at the prospect of being asked to contribute, but solving the structural problem of funding Eiopa's activities may well produce improved regulatory outcomes.