Restrictions in the European Union’s proposed securitisation framework could reduce the number of insurers eligible to provide credit protection, raising counterparty concentration risk, according to the Association of Bermuda Insurers and Reinsurers (ABIR) and Insurance Ireland.
The industry groups said elements of the European Commission’s proposal - including size thresholds, group recognition provisions and safeguard requirements - could exclude EU-authorised insurers belonging to groups headquartered in Solvency II-equivalent jurisdictions outside the EU, including Bermuda and Switzerland. These insurers already provide credit risk transfer capacity to European banks.
“This unnecessary exclusion risks a severely limited pool of eligible insurers, increasing counterparty concentration risk, and weakening the crucial STS unfunded credit protection market,” said John Huff, president and CEO of ABIR.
He added: “This is more than mere financial technicalities, because rather than mobilising additional private capital, the proposal as currently drafted risks excluding credible insurance capacity, reducing banks ’risk-management options, and constraining lending, especially for core asset classes such as residential mortgages, SME loans, and long-tenor infrastructure finance - precisely what Europe needs for the development of its Savings and Investments Union(SIU).”
The concerns come during a wider overhaul of the EU securitisation framework. The European Commission has proposed amendments to Regulation (EU) 2017/2402 and the Capital Requirements Regulation in an effort to revive the region’s securitisation market and free up bank capital for lending, according to market analyses and policy briefings published in 2025.
The proposed reforms respond to long-standing criticism from financial institutions that the post-2008 regulatory regime introduced high compliance costs and capital requirements that have limited issuance and investment activity. European securitisation volumes have stagnated since the financial crisis while the US market continued to grow, according to industry and policy reports published in 2025.
Brussels’ plan includes revisions to due diligence rules, simplified reporting templates and risk-sensitive capital treatment for securitised assets. Proposed changes would also lower minimum risk weights for certain high-quality securitisation tranches and revise capital calculation formulas used by banks.
Within this policy review, the Commission has proposed allowing synthetic simple, transparent and standardised (STS) securitisations to use protection from insurers and reinsurers meeting solvency and diversification requirements.
“The European Commission’s 2025 proposal of opening synthetic STS to (re)insurers as protection providers, was an important and welcome step toward advancing the Savings & Investments Union. However, further progress is needed to support real market scale, as the current safeguards remain too narrow to enable a deeper, more scalable market,” said Moyagh Murdock, CEO of Insurance Ireland.
ABIR and Insurance Ireland said insurers have participated in the EU’s non-STS synthetic securitisation market since 2018 under prudential and governance regimes such as Solvency II and equivalent supervisory frameworks in third countries.
In these transactions, insurers provide unfunded credit protection that allows banks to transfer part of their credit exposure while retaining the underlying loans.
“Within this framework, unfunded credit protection provided by non-life re/insurers is a straightforward and well-established risk-transfer tool. By purchasing insurance against credit losses, banks can achieve significant risk transfer while retaining the underlying loan portfolios,” said Huff.
“A well-functioning securitisation market will enable banks to manage risk efficiently, free up regulatory capital, and expand lending to households, Small and Medium-sized Enterprises (SME), and long-term investment projects - often without transferring customer relationships or relying exclusively on funded capital market investors,” Huff added.
Insurance Ireland and ABIR members have long participated in European insurance markets. Irish insurers paid €74 billion in claims and safeguarded €300 billion in life and pension assets in 2023. Bermuda reinsurers paid about €24.8 billion to EU policyholders and cedants for property and casualty losses and life insurance claims between 2016 and 2020.
The two groups said regulatory clarifications should maintain prudential safeguards while allowing a competitive group of insurers to participate in securitisation transactions.
“Insurance Ireland and ABIR jointly support targeted, proportionate clarifications to the securitisation regulatory package that preserve strong prudential safeguards while ensuring that the framework is workable in practice, reflects how insurance groups are actually supervised, and allows a sufficiently broad and competitive pool of insurers to support the EU’s real economy,” said Huff.
The issue was discussed at a recent event held at Insurance Ireland’s Brussels office attended by representatives from the European Parliament, the European Commission and participants from the global reinsurance sector.
ABIR represents Bermuda property and casualty insurers and reinsurers operating in about 150 countries, while Insurance Ireland represents about 95% of companies operating in the Irish insurance market.
