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In January the EU Parliament and Council reached agreement on a set of amendments to the Solvency II Directive. The Parliament endorsed the proposals in April. It is anticipated the changes will be in operation by early 2026, writes Dick Roche.

The changes are wide-reaching. They strengthen supervisory powers over the insurance industry across a range of areas and enhance the role of the European Insurance and Occupational Pensions Authority (EIOPA).

While there have been protracted discussions on the proposals since they were published one important issue has, curiously, been overlooked  – the fitness of EIOPA to fulfil the enhanced role that it will have when the proposed changes take effect.  

EIOPA vs the national bank of Slovakia 

In July 2021 EIOPA issued a Recommendation  to the National Bank of Slovakia  (NBS), the authority which regulates Slovakia’s insurance industry,  requiring it to take action “against an (insurance) undertaking which pursues cross-border business in several countries.” 

The company in question, which was not identified by EIOPA sold life insurance in, Czechia, Austria, Germany, Hungary, Poland, Italy, and Iceland, in addition to its customers in Slovakia.

EIOPA took the view that the company was operating in breach of Solvency II requirements and that it should lose its licence to operate if it continued to operate without meeting those requirements. 

NBS vigorously defended its position, indicated it viewed “the situation differently”, argued that its step-by-step approach was in compliance with principle-based Union law and that it was taking “other steps” to achieve the required changes by EIOPA.

In November 2021 EIOPA again contacted NBS and noting that it had not taken the recommended actions declared NBS to be “non-compliant ” and instructed that it take the required supervisory actions.

On 16 May 2022, EIOPA issued a further Recommendation to NBS requesting it to “consider whether it has effectively exhausted the list of proportionate possible supervisory options” and gave it 45 days to act in line with EIOPA’s position. EIOPA made clear that the actions taken should “result in either a structural and sustainable recovery of all infringements or if appropriate or mandatory, a withdrawal of firm’s authorisation”.  To increase the pressure on NBS, EIOPA asked the European Commission to intervene.

In September 2022 the Commission adopted a formal opinion on the case. It concluded that the evidence collected by EIOPA in the case indicated that the insurance company had been “non-compliant over the past years with Solvency II. While noting that NBS had announced “an integrated supervisory strategy and initiated several supervisory actions” against the insurance company, the Commission stated that NBS had to go further.

Shortly after the EC issued its Formal Opinion, NBS announced it would revoke the licence of Novis. The company objected. On 1 June 2023 after seven months of lengthy internal wrangling NBS announced that it was withdrawing the authorisation of NOVIS to sell life insurance. A week later NBS petitioned the Commercial Court to appoint a liquidator and to commence liquidation proceedings against NOVIS.

The company requested the Administrative Court to review the decision of NBS arguing that it was laced with errors, ignored evidence that was presented, was based on a flawed assessment of facts and an incorrect application of the law.

 Eighteen months on a liquidator has not been appointed. Both the Commercial and the Appeal Court decided to suspend the liquidation procedure until Slovakia’s Administrative Court decides on the legality of NBS’s licence decision.

Double standard

How the Commission, and EIOPA, viewed the role of NBS is strikingly different from the approach that both adopted in a case involving the Romanian Financial Supervisory Authority, ASF, and the Romanian subsidiary of the Bulgarian-headquartered Euroins Insurance Group, (EIG), one of the largest independent insurance groups in Central and Eastern Europe.  

In March 2023, in highly questionable circumstances ASF, withdrew the licence of Euroins Romania asserting that there was a deficiency in relation to the minimum capital requirements in the company. Less than four years earlier ASF put pressure on Euroins to take over Romania’s largest provider of motor insurance which was floundering.

The allegation about Euroins’ position was hotly contested. The Bulgarian Financial Supervision Commission, the European Bank for Reconstruction and Development (EBRD) and EIG challenged the position taken by ASF. ERBD made the point that if any of the deficiencies alleged by ASF existed they could be remedied. All of this fell on deaf ears.

 When MEPs raised concerns about ASF, sought clarification on the approach adopted by EIOPA, looked for access to the material that informed its actions, or sought to have the accuracy of that material independently reviewed, the EU Commission took the view  that “day-to-day supervision (of an insurance operation) is the exclusive competence and responsibility of the national supervisory authorities.”

The positions taken by the Commission and EIOPA regarding the national regulators in the Euroins and NOVIS cases were diametrically opposite. The position taken by the Romanian regulator was seen as sacrosanct. A different standard was applied to the Slovak regulator.

Quite how this double standard can be explained would make it an interesting subject for parliamentary questions in the new Parliament.

Secrecy

While the approach adopted by EIOPA and the Commission in the two cases diverges on the role of the national competent authorities their position on transparency is identical in both cases.

EIOPA refused to allow the affected parties in both cases access to information.  In the Euroins case, it withheld material from the EU Parliament and even failed to share a report it prepared from the EU Commission.

 When NOVIS sought access to EIOPA documentation relating to its case it ran into a brick wall. EIOPA acknowledged that it had nine documents relevant to the case but refused access citing the need to protect possible court actions, to protect audits/investigations, and to protect its own decision-making procedures.

NOVIS appealed this to the European Supervisory Authorities Board of Appeal. The Board decided that EIOPA’s blanket refusal of access to documents was unacceptable and required EIOPA to make an amended decision.

On foot of the Board of Appeal decision EIOPA released only one document with over 80% of the text redacted, a hubris-ridden response that would be unlikely to go unpunished were it to happen in any Member State.   

Competence  

Reviewing the performance of any insurance undertaking is by its nature complicated. Assumptions have to be made on key issues. It is critical that those assumptions are well based, otherwise the old adage, ‘garbage in garbage out applies’.

Two specific elements in EIOPA’s analysis in the NOVIS case raise questions – the assumption it used about the yearly future cancellation rate of the company’s insurance contracts and its assumption of yearly costs of servicing the company’s existing insurance contracts. Both have been vigorously contested and shown to be fundamentally flawed.

In the analysis EIOPA included an exceptionally high future cancellation rate of insurance contracts: it presumed that the cancellation rate for contracts from the 4^th year onward should be above 20% annually, a figure that makes no sense.

When this was raised with NBS it stated in a document that the cancellation rate figure had been provided by the Italian Institute for the Supervision of Insurance.  Subsequently NBS admitted that the Italian regulator never provided Market data. EIOPA chose to ignore the clarification and continued to rely on the 20% figure in its claim that NOVIS did not fulfil its Minimal Capital Requirement (MCR). 

The second questionable assumption in EIOPA’s analysis concerns the annual cost of servicing existing contracts. EIOPA based its analysis on the assumption that the annual future cost attributable to each of the Slovakian company’s contracts was approximately €300.

Based on a 2021 benchmark study, Market Consistent Market-Consistent Expenses in European Life Insurance prepared by actuarial consultancy, Milliman, a more credible figure for the annual future for servicing existing contracts would be €70 or less. 

The combination of two extreme assumptions in EIOPA’s calculations fundamentally undermines its analysis and, by extension undermines the Formal Opinion that the Commission addressed to NBS in September 2022.

Reflecting the obduracy demonstrated in the Euroins case neither EIOPA nor the Commission, which was essentially ‘led and said’ by it, attempted to independently verify the data.

This does not inspire confidence in EIOPA and as suggested at the outset raises questions about EIOPA’s fitness to fulfil the enhanced role envisaged for it in the proposed Amendments to the Solvency II Directive.   

Enhancing EIOPA’s role while ignoring its deficiencies

In January 2024 the EU Parliament and Council reached agreement on a set of amendments to the Solvency II Directive. The proposed changes were approved by the Parliament in April. It is anticipated that the changes will be implemented in the first half of 2026.

The new requirements will include arrangements for the supervision of “significant cross-border (insurance) activities”.

Significant cross-border activities are defined as insurance or reinsurance activities carried out under the freedom of establishment or freedom to provide services by an undertaking, where the total annual gross written premium income exceeds €15 million, which is not a huge figure, or where the activities carried out are considered by the supervisory authority of the Member State into which the services are being sold as being of relevance to its domestic market.

These proposals align with EIOPA’s ambitions to have its role broadened in relation to cross-border insurance business.

Representatives of the insurance industry have unsurprisingly raised red flags regarding the proposed changes. They see them as an additional barrier to cross-border business and as putting limits on the freedom to provide services – a freedom enshrined in the founding treaties. They point to the focus on control rather than on the integration of the EU insurance market, to the fragmentation of the regulatory system, and to the consequences of additional regulatory burden on EU insurers.

The demonstrable lack of transparency and aversion to democratic oversight that has been a hallmark of EIOPA’s operations should be added to the list of concerns about the changes that are underway. 

In their rush to endow the Authority with significant additional supervisory reach, it is disturbing that EU lawmakers have chosen to ignore EIOPA’s failures in terms of transparency and accountability. That oversight needs to be addressed. 

Dick Roche is a former Irish Minister for European affairs and former minister for the environment. 

Source: https://www.eureporter.co/world/slovakia/2024/10/29/a-decision-eu-lawmakers-should-rethink/

NOVIS Insurance Company is actively participating in a case before the European Court of Justice (ECJ), which addresses important questions about the fair application of insurance supervision regulations within the EU. Dr. Jürgen Bürkle, one of the leading legal experts in Germany for insurance law, published an independent analysis into how NOVIS is challenging administrative actions, seeking to ensure clearer and more consistent regulatory practices for the benefit of all insurance providers and their clients across Europe.

It can be accessed on the following link (free registration is required):

Article by Dr. Juergen Buerkle

On August 21, 2024, the Regional Court in Bratislava upheld the decision of the Municipal Court Bratislava III from February 13, 2024, to suspend the proceedings for the dissolution and liquidation of NOVIS initiated by the National Bank of Slovakia (NBS). The decision of the Regional Court was published in the electronic file on October 2, 2024.

The proceedings for the dissolution and liquidation are therefore suspended until a decision is issued on NOVIS’s administrative lawsuit against the NBS’s decision to revoke its license, which is currently being reviewed by the Administrative Court in Bratislava. If the Administrative Court rules in favor of NOVIS, the dissolution and liquidation proceedings will become irrelevant.

As a result, NOVIS has not been dissolved, nor has the liquidation process commenced..

In its decision, the Regional Court disagreed with the main arguments presented by NBS in its appeal against the decision of the Municipal Court Bratislava III. On the contrary, the Regional Court upheld the lower court’s position and also granted NOVIS the right to full reimbursement of the costs of the appeal proceedings.

NOVIS considers this decision to be a significant step in the legal dispute challenging the NBS’s decision to revoke its license.

In its decision, the Regional Court confirmed that the suspension of the dissolution and liquidation proceedings would not have been possible if NOVIS’s lawsuit had been unfounded.

NOVIS remains operational and continues to provide insurance services to its existing clients.

Writes Dick Roche.

EU Regulation (EC) No 1049/2001  aims to ensure that EU citizens can exercise their right of access to all documents held by the EU institutions. The EU Charter of Fundamental Rights also guarantees EU citizens the right of Access to documents held by EU institutions.  Article 15 of the Treaty on the Functioning of the European Union requires that the “Union’s institutions bodies offices and agencies shall conduct their work as openly as possible” and again enshrines a legal right of access to documents held by EU institutions and agencies.

While these guarantees are clear, one significant EU body, the European Insurance and Occupational Pensions Authority (EIOPA), has assumed the right to operate as if EU commitments to openness were never made.

Two cases that have been playing out recently demonstrate the extraordinary secrecy with which EIOPA seeks to shroud its operations.

The Euroins Case

On 2nd February 2023 the Romanian Financial Supervisory Authority, ASF, published a devastating permanent capital report on Euroins Romania, alleging  a capital “shortfall of  € 400 million in relation to the solvency capital requirement and of € 320 million in relation to the minimum capital requirement. ”  No such concern featured in previous ASF reviews. Indeed, in 2019 ASF ‘requested’ Euroins to take over City Insurance Romania’s largest motor insurance provider which was in difficulties –  a request that Euroins refused.

Following release of the ASF report the company, part of the Euroins Insurance Group (EIG), one of the largest independent insurance groups in Central and Eastern Europe, turned to EIOPA requesting an extraordinary meeting of the relevant Solvency II College of Supervisors and a full review conducted by independent experts, of its financial position.

EIOPA responded that a Colleges of Supervisors meeting had already been held been held. On the question of an independent review it made the point that “day-to-day supervision is the exclusive competence and responsibility of the national supervisory authorities”, a mantra repeatedly used in the months that followed.

Instead of taking up the proposal for an independent review, EIOPA decided to conduct a behind-closed-doors assessment of  Euroins Romania’s position.

Remarkably neither the EIOPA report itself nor the preparatory steps EIOPA took to prepare it were disclosed to Euroins Romania or with EIG.

The Bulgarian Financial Supervision Commission (FSC), the national supervisory authority for the Euroins Insurance Group and the European Bank for Reconstruction and Development (EBRD) also approached EIOPA.

FSC registered concerns regarding the actions of the Romania regulator. Its intervention got nowhere.

The EBRD – which in 2021 invested over €20 million in EIG  to stabilise the Romanian insurance industry – made a robust intervention.  

The Bank questioned the assertion of a major capital deficiency in Euroins Romania, labelled ASF’s position as “a complete departure”  from previous positions taken by it, and challenged the regulator’s position on Euroins reinsurance contracts. While insisting that there was no liquidity crisis in Euroins Romania, ERBD  made the point that if such a problem existed or if additional capital was required remedial actions could have been taken to resolve both issues.

In the absence of a response to its approach from EIOPA, EBRD appointed a leading actuarial accounting firm to conduct “a rapid assessment” of Euroins’ position.

Keeping the EU Parliament in the dark

The EIOPA report on Euroins, “Assessment of the Gross-to-net Technical Provision of Euroins Romania in MTPL” was completed in late March 2023.  

The report has not been published, however, a key conclusion was revealed, apparently accidentally in a report by the Board of Appeal of the European Supervisory Authorities [BoA-D-2023-01 of 8 June 2023]. Paragraph 12 of this report reads “according to the EIOPA Report, Euroins Romania had a deficiency of the net best estimate for the MTPL business at the reference date of 30 September 2022. In EIOPA’s view, the deficiency was in the range between EUR 550 million and EUR 581 million” ^[1].

That conclusion differs dramatically from the three reports of Romania’s ASF issued before February 2023. It even differs from the figures set out in the controversial ASF report of 2 February 2023.

It also clashes dramatically with the independent review commissioned by ERBD. That  review, finalised within days of the EIOPA report, concluded that Euroins’ reinsurance contracts met the requirements of Solvency II for risk transfer and that Euroins Romania was solvent with no capital gap.  

From March 2023 until the closing weeks of the 9^th EU Parliament questions tabled on the Euroins case were stonewalled by the Commission.  Replies to PQs were defensive, evasive, misleading, and disingenuous.

The Commission failed to respond to questions about the sources of data used by EIOPA in preparing its report, or on EIOPA’s failure to consult with Euroins in its preparation.  When asked by MEPs to independently review the EIOPA report the Commission replied that it had “not received any evidence of irregularities related to the preparation or content of EIOPA’s report”.

On 4 April 2024  – as the term of the 9^th EU Parliament’s was concluding – the Commission admitted in in response to a PQ  [ E-000592/2024 ] that the EIOPA report had not been “shared” with it. The Commission had been concocting answers  to PQs on a report it had never seen.

EIOPA Strikes Again

A second example of EIOPA’s reluctance to be open or transparent is evident in a case involving NOVIS a life insurance company established in Slovakia and providing services in a number of EU countries.

In June 2023 the Slovakian national supervisory authority Národná Banka Slovenska (NBS) withdrew the authorisation of NOVIS to operate.

EIOPA and the Commission were – contradicting the mantra that “day-to-day supervision is the exclusive competence and responsibility of the national supervisory authorities” invoked repeatedly in the Euroins case -directly involved in driving that decision.  

In May 2022 EIOPA concluded that NOVIS’ operations were non-compliant with Solvency II and that NBS had failed to take the necessary corrective measures. In September the Commission, supporting the position taken by EIOPA, required NBS to “fully comply with the terms of Solvency II”

NOVIS challenged the decision to withdraw its authorisation in the courts.   It also lodged a request with EIOPA under Regulation 1049/2001 requesting access to documents relating to the case.

Echoing its approach in the Euroins case, EIOPA, which had identified nine documents relevant to the NOVIS request, denied access to all documents. It argued that refusal of access was necessary for “the protection of court proceedings”, the protection of  “inspections, investigations and audits” and for the protection of its own decision-making process – a novel interpretation of EU Treaty commitments that EU institutions “conduct their work as openly as possible”.

NOVIS appealed the refusal to the Board of Appeal of the European Supervisory Authorities (BoA).  The Board concluded that in the case of two of the nine documents it identified as relevant “EIOPA’s interpretation of the public access exceptions and of the obligation of professional secrecy were too wide”.

In the case of the other documents, the BoA found that while “there may well be good reason to refuse access” it is a matter for EIOPA to “examine to what extent partial access should have been granted”

On the basis of these considerations, the Board decided to allow the appeal and returned the case to EIOPA “for the adoption of an amended decision”. EIOPA has still to respond to this.

Preaching Openness but not Practicing it

EU commitments to openness and transparency are directly challenged by EIOPA’s approach in the Euroins and NOVIS cases. Both cases highlight a striking unwillingness by a significant EU agency to operate with anything approaching transparency.

In both cases, EIOPA has been allowed to shield significant decisions from public scrutiny and objective public analysis.  The companies directly impacted by the decisions taken were denied access to the analysis that supported executive decisions in a way that is hard to imagine being tolerated by a national agency in an EU Member State.

In the Euroins case not only was EIOPA allowed to operate with a stunning lack of transparency, but the EU Commission went to extraordinary lengths to frustrate MEPs’ efforts to bring some clarity to the case.    

Both cases point to an urgent need to review how EIOPA has been allowed to effectively self-determine the principles on which it operates without any effective scrutiny.   

Dick Roche is a former Irish Minister for European Affairs and former Minister for the Environment.

[1] Intriguingly the non-redacted version of June 2023 BoD report that was initially uploaded to the internet was subsequently replaced by a version of the report in which paragraph 12 and a significant part of paragraph 14 were redacted.

https://www.eureporter.co/politics/european-commission/2024/08/30/eu-agency-that-ignores-eu-treaty/

Photo by Christian Lue on Unsplash

NOVIS is seeking to obtain classified documents from the National Bank of Slovakia (NBS), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Commission (EC), which pertain to potential violations of EU law by NBS in its regulation of NOVIS.

In this context, NOVIS achieved a significant success. The Joint Board of Appeal of the European financial supervisory authorities (EIOPA, EBA, and ESMA) ruled that EIOPA unlawfully withheld the requested documents from NOVIS. EIOPA must reconsider its decision and reimburse NOVIS for all the costs incurred in this matter.

Further details can be found in the attached public notice: A Groundbreaking Decision in Favor of NOVIS: EIOPA Must Reconsider Its Decision to Withhold Crucial Documents.

NOVIS wishes to inform clients and partners about the latest developments in the ongoing legal process.

Background

On June 1, 2023, the National Bank of Slovakia (NBS) made a decision to revoke NOVIS's insurance license and subsequently requested the competent court to initiate a liquidation process.

After a thorough review, NOVIS determined that the NBS's decision was based on a misinterpretation of facts and an incorrect application of relevant laws. In response, NOVIS filed a comprehensive, 115-page lawsuit on August 4, 2023, challenging the legality of the NBS's decision and demanding its complete annulment. NOVIS supported its lawsuit with three strong expert opinions, whereas such an independent review is missing in the NBS's argumentation.

Current Status

On February 13, 2024, the Bratislava III Municipal Court suspended the liquidation process requested by the NBS against NOVIS, pending the final decision on NOVIS's lawsuit against the NBS decision, which is currently under review by the Administrative Court. NOVIS is confident that this suspension can be interpreted as an indication of the court's skepticism towards the NBS's decision.

NOVIS's operations continue as before, all insurance policies remain active and unaffected. NOVIS processes customer inquiries promptly and efficiently.

NOVIS appreciates your continued support and patience as it goes through this process and will keep you updated on further developments.

Other important information:

• Press release: Národná banka Slovenska revoked the license of NOVIS (Author: NBS)
• NOVIS company - most frequently asked questions (Author: NBS)
  
  

Only 18% of European citizens possess a high level of financial literacy, while another 18% ranks at the low end of the scale. This is why Europe is calling for greater literacy, to reduce the risks of financial exclusion. 

To improve a general understanding of financial products and be able to make financial decisions on the basis of adequate information: this is the purpose of financial education, a process that enables anyone to acquire the necessary skills and know-how to make informed decisions with a major impact on their lives.

It is not so much a matter of learning how to build an investment portfolio, as of making asset allocation choices that are consistent with one's needs and goals.

When is it good to start saving for retirement? Is it better to keep one's savings as liquidity or invest them in financial assets? How can one learn to understand market trends? These are some of the questions that everyone should be able to answer with a good level of financial literacy. However, surveys show us that all this is still a long way off. 

Financial knowledge is still low among most Europeans

The Eurobarometer survey published in July 2023^[1] by the European Commission shows that only 18% of EU citizens have a high level of financial literacy, 64% a medium level, and the remaining 18% a low level.

Only in the Netherlands, Sweden, Denmark and Slovenia do more than 25% of people score highly in financial literacy. For example, around 35% of respondents do not comprehend the impact of inflation and its potential consequences on purchasing power, while only 45% understand how compound interest works, despite the importance of this concept for managing personal finance and achieving long-term saving goals. Moreover, more than 40% of respondents are unable to correctly associate higher returns with greater risks.

Therefore, it is not surprising that, according to the Eurobarometer survey, 18% of respondents only have three months’ savings with which to continue covering their living expenses, without borrowing any money or moving house, in the event of losing their main source of income, while 16% state that they do not have any emergency savings at all.

According to the European Commission, these results point to the need for financial education to target in particular women, younger people, people with lower income and with a lower level of general education, who tend to be on average less financially literate than other groups.

Financial literacy: why it is important

In the Capital Markets Union 2020 Action Plan^[2], the European Commission had already stated that “sound financial literacy is at the heart of people's financial well-being”. As a result, several initiatives have been developed, including the Retail Investment Strategy^[2] adopted in May 2023 with the aim of providing non-institutional and non-professional investors with the tools to make decisions that are aligned with their needs and preferences, enhancing trust and confidence, so that everyone can take full advantage of the opportunities offered by the financial markets.

Some countries are trying to bridge the gap: in Italy, for example, a 2017 law identifies financial literacy as a subject to be studied also in schools. The law was enacted in the wake of the major financial crises of 2008 and 2012 (caused by sub-prime mortgages), which showed how a lack of understanding of financial dynamics can lead to crises on a global scale.

It will take time to see the results of such initiatives as the process of knowledge consolidation needs to be strengthened, but COVID has already shown that, at critical times, those with greater knowledge – or at least the support of an advisor (generally consulted by those with better financial literacy) – are better able to withstand the shocks that may occur in the world economy.

However, it is not just a matter of avoiding mistakes, but also of seizing financial opportunities. Indeed, low levels of financial literacy can mean being excluded from or having poor accessibility to efficient asset management solutions at a time when the welfare state is becoming increasingly less generous.

We need only think of what is happening on the social security front: due to a number of factors – including the so-called imbalance caused by the ‘demographic winter’, which favours pensioners over workers – social security systems are having to raise the retirement age and provide retirement benefits closely linked to the contributions paid in order to ensure their sustainability.

This means that workers whose careers have been characterised by discontinuous employment will have to make do with rather underwhelming retirement benefits.

Having the skills to supplement one's pension earlier on in life should be a guarantee of the financial well-being of the beneficiary, but also of greater equality within society.

^[1] https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/capital-markets-union/capital-markets-union-2020-action-plan_en

^[2] https://finance.ec.europa.eu/publications/retail-investment-strategy_en

^[3] https://finance.ec.europa.eu/news/eurobarometer-survey-reveals-low-levels-financial-literacy-across-eu-2023-07-18_en#:~:text=The%20survey%20tested%20both%20the,18%25%20%2D%20a%20low%20level.

The considerable challenges posed by the environment and innovation are opening up new horizons for the real economy, which is becoming one of the assets to be taken into account when diversifying an investment portfolio. 

In recent years, an awareness of the consequences of climate change, the opportunities offered by technology, and the need to reduce social inequalities further exacerbated by COVID have led Europe to implement sustainable development strategies that are thoroughly transforming our economic system.

The goal, for example, of obtaining zero carbon emissions by 2050 so as to curb the rise in global temperatures has triggered a profound transformation that affects not only consumption, but above all the way we produce. Applying the principle of circular economy, for example, means reviewing product design in order to reduce waste or rethinking production lines so that secondary raw materials can be reused and end-of-life materials recovered. It also means transitioning energy sources from carbon to renewables.

This historic change, ushering in a new renaissance of the European economy, also opens up new opportunities for growth and, consequently, new prospects for investors wishing to diversify their portfolios.

The importance of diversification: why the real economy should be regarded as an opportunity

Diversifying investments means distributing available resources among different asset classes and economic sectors to reduce exposure to the specific risk of a particular company or sector.

This concept was summed up effectively by Warren Buffett, one of the most successful investors of all time, in his maxim: ‘Do not put all your eggs in one basket’. In other words, invest all your capital in one stock or sector and you will expose your portfolio to significant risk: if that particular investment experiences difficulties or declines, the entire portfolio will suffer. Diversification, on the other hand, means allocating capital in a balanced way among different asset classes, such as stocks, bonds, real estate, commodities, and so on.

This strategy helps to reduce the overall risk in your portfolio, given that negative variations in one area can be offset by positive returns in others.

The real economy, i.e. the set of businesses that produce goods and services and distribute them on the market, is one of the categories towards which capital can be directed in order to offset the volatility of the financial markets, as companies that produce concrete products and services tend to be less susceptible to sudden fluctuations.

The significant evolution currently experienced by the real economy as a result of the ongoing transitions is opening up new growth opportunities for companies and, consequently, for investors.

The European Green Deal, which aims to make the EU climate-neutral by 2050, seeks to boost the economy through green technologies, create sustainable industries and transport, and reduce pollution. To achieve the targets set, the Commission has undertaken to mobilise at least EUR 1 trillion in investments^[1]. The same applies to digitalisation, to which Europe has allocated EUR 1.3 billion^[2] with the Digital Europe programme.

The road ahead is fraught with unknown variables: these transitions mean that some companies, closely linked to the 'old' way of producing, will have to undergo huge changes to reshape their business system. However, having set such important goals and resources has laid the foundations for a new renaissance of the real economy, which has started in Europe but is destined to expand, in the long term, to all other major international markets, from the Americas to Asia.

Why governments incentivise investment in the real economy: the case of the ISPs

This path towards a modern, resource-efficient and competitive economy also opens up new opportunities for investors, who can make use of instruments linked to unlisted companies in order to grow.

In some European countries, governments have long been providing tax benefits to actively encourage investments in the real economy. In Italy, this has been achieved with Individual Savings Plans (ISPs), set up in the wake of similar instruments also available in other countries (see France’s PEAs and Britain’s Individual Saving Accounts).

In their different ways, these instruments are all rooted in a desire to bring private savings, often held in the form of liquidity (with virtually no returns and exposed to erosion by inflation) in contact with business investments, especially those of small and medium-sized companies which do not normally access the financial markets and therefore do not avail of capital to finance innovation, research, and, ultimately, growth.

This is why in principle these plans offer significant tax advantages. ISPs, for example, offer tax exemption on capital gains and dividends, provided the investments are held for at least five years. This requirement is useful both to the investor, to obtain medium-to-long-term benefits, and to the recipient of the investment, as five years are a sufficient period of time in which to set up, develop and consolidate the results of a project conceived to make a company grow.

Moreover, in addition to tax benefits, these instruments provide access to opportunities from the real economy, also driven by the ongoing transitions. COVID, for example, has shown that the most sustainable and innovative companies are also those most resistant to crises: investing in SMEs or in companies with ongoing digitalisation processes and committed to sustainability means being able to count on essentially stable assets. 

From this perspective, diversifying your portfolio by investing in the real economy is a strategy worth taking into consideration - based on your risk profile and with the support of an advisor - if you wish to seize emerging opportunities and offset volatility.

^[1] https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/finance-and-green-deal_it

^[2] https://digital-strategy.ec.europa.eu/it/news/eu13-billion-digital-europe-programme-europes-digital-transition-and-cybersecurity

In the first six months of the year, inflows for investments in fixed-income securities registered record growth. Investors mainly chose government and corporate investments to diversify their portfolios. What will happen until the end of the year?

2023 continues to see investors favoring bonds, continuing a trend that had already been identified since late 2022.

After the positive figures of the first quarter, the second quarter also confirmed an extremely positive trend. According to data published by Morningstar on ETF (Exchange Traded Fund) flows (data updated in June), European investors preferred those into bonds. These reached EUR 15.9 billion, up from EUR 15.1 billion in the previous quarter. By contrast, equity strategies recorded inflows of EUR 12.7 billion in the same period, 42% less than in the year's first three months.

ETFs do not cover all the bond market, but they indicate what is happening in it. In Italy, for example, Assoreti pointed out that in asset management, for the first six months of the year, government bonds and corporate bonds remained the preferred investment choices^[1]: EUR 4.3 billion net inflows in June for government bonds, EUR 1.3 billion for corporate bonds, while the balance of movements in equities was negative (EUR -314 million).

But what is the reason for this interest in fixed-income securities emerging at the European level?

The rise in interest rates marks a turning point for bonds

Bonds are debt instruments that entitle holders to receive a predetermined stream of payments, which include the repayment of the principal and the payment of the interest. They are therefore fixed-income securities because the promised remuneration is predefined in terms of amount and schedule, unlike equities, which depend on the issuer's profitability.

They are therefore useful tools for optimizing investment portfolios and balancing risk and yield.

In past years, interest in bonds, especially government bonds, has been discouraged by their low yields. In recent months, however, the rise in interest rates has been a turning point, because it has led to higher yields on the safest assets in the bond market, such as government bonds, thus making them more attractive to investors.

In fact, at a time of great volatility in equities, flows have turned to bonds, in the form of government and corporate bonds or bond ETFs, which reached an all-time high in the first half of 2023 as investors rebalanced their portfolios, benefiting from rising yields.

What will happen in the rest of 2023?

Investments and prospects: Diversification is the key

While bonds benefit from rising interest rates in terms of yield, their main ‘enemy’ is inflation, as rising prices erode the purchasing power of fixed incomes, which do not have the same pace of inflationary growth.

Take, for example, pensions, which are synonymous with fixed incomes and remain unchanged: if prices rise, purchasing power is gradually eroded.

However, in Europe, but also the US, inflation is slowing down, thus also reducing the impact on bond investments, while observers expect interest rates set by Central Banks to peak in the coming months. Also in the second half of 2023, favorable conditions could therefore be created for flows into bonds, replicating the results of the first half of the year.

It should always be recalled, however, that an investment portfolio should not be constructed based on sentiment or market trends, but in the light of one’s own risk profile and expectations. In this decision-making process, which should be assessed on a case-by-case basis, including with the support of a financial advisor, it is always useful to remember that diversification is the main strategy that helps to spread risks and balance yields, according to one’s objectives.

Diversifying between bonds and equities, and choosing assets from different sectors, latitudes, and currencies remains crucial to efficiently manage one’s investment package.

^[1] https://assoreti.it/wp-content/uploads/2023/07/Comunicato_flussi_giugno2023.pdf

In June 2023, the European Commission presented a new package of measures to strengthen the regulatory framework for sustainable finance. Meanwhile, after Europe, other states worldwide are working to define a “vocabulary” to facilitate sustainable investments.

Sustainability has long been at the heart of the European Union policies, which has set itself ambitious but necessary climate and energy targets to try to contain the rise in temperatures that are driving ongoing climate change.

In particular, Europe has pointed to the need for a transition to a low-carbon and resource-efficient economy as the only possible way forward. This would act as a kind of new “industrial revolution”, which may also have positive impacts on the economy, innovation, employment, and on global competitiveness.

In order to make this paradigm shift, however, a lot of investment is needed. This is because it would cost around 180 billion euro per year^[1] to reduce greenhouse gas emissions by 40 percent, make the EU climate-neutral by 2050 and meet the 2030 targets of the Paris Agreement.

For this reason, the financial world has assumed a central role in the transition process. Still, in order to efficiently channel investments and optimize results from an ESG perspective, Europe has found it necessary to fill a gap, namely the absence of a standard and shared framework defining what is genuinely sustainable. In the past few years, this shortcoming has meant a proliferation of very different approaches and valuation methodologies, resulting in dissimilar analyses that are often not comparable even for the investors themselves. This was the starting point for the European Taxonomy^[2], namely building a common language of sustainable investments,

The Taxonomy Process: the latest news

As things stand, Europe has approved two of the six delegated acts that set out criteria for identifying activities and efforts which contribute to climate change mitigation and adaptation and can therefore collectively be considered as activities genuinely worth investing in according to ESG criteria.

The process, however, further developed in June when the European Commission presented a new package of measures to strengthen the EU framework on sustainable finance^[3].

In particular, the list of activities included in the manufacturing and transport sectors, which were previously not covered, has been expanded, broadening the scope of economic activities contributing to climate change mitigation and adaptation. According to the Commission, “the inclusion of more economic activities covering all six environmental objectives, and consequently more economic sectors and enterprises, will increase the usability and potential of the EU Taxonomy in increasing sustainable investments in the EU”.

The main news item in June, however, was the approval of a new set of criteria to identify other activities to be included in the EU Taxonomy through the future four delegated acts, which will determine which sectors and activities contribute to one or more of the following environmental objectives:

• sustainable use and protection of water and marine resources,
• circular economy,
• pollution prevention and control,
• protection and restoration of biodiversity and ecosystems.

Not least, the Commission provided a set of recommendations on transition finance for companies and the financial sector, showing how to use the various tools of the sustainable finance framework on a voluntary basis to steer investments toward transition and manage the risks arising from climate change and its impacts on the environment.

The objective of these recommendations is to support investments for so-called “laggards”, i.e. companies that have been late in making progress, or those that have a longer road to transition ahead of them due to the intrinsic characteristics of their business or size issues.

Sustainable finance, Taxonomy also reaches states outside the EU

While the process is underway in Europe, other states outside the old continent are beginning to develop a lexicon of sustainable finance. 

This is happening for example in Latin American countries, where Colombia has launched its own taxonomy to strengthen sustainable financing in the country, leading the way for Chile, Mexico, and Peru. In North America, it was Canada that published the “Taxonomy Roadmap Report”, a document that serves as a guide for the development of a new taxonomy of green investments in order to create the clarity needed for industry players actively seeking sustainable investment opportunities.

In Asia, this is the case in states such as Indonesia, Sri Lanka, and Kazakhstan. The European taxonomy is a benchmark for everything and is then adapted to the national context, according to specific circumstances.

Will it lead to a worldwide taxonomy? On the contrary, there are already common elements between the different documents proposed by the states. In particular, the European model is becoming the benchmark, with its six objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems.

The various states are therefore adapting actions and criteria to the national context, according to specific needs. Colombia, for example, has focused a lot on directing investments toward soil conservation.

The road ahead is obvious, as is the fundamental role of the financial world in supporting the ecological transition to environmental sustainability.

^[1] https://www.consilium.europa.eu/it/press/press-releases/2019/12/18/sustainable-finance-eu-reaches-political-agreement-on-a-unified-eu-classification-system/

^[2] https://ec.europa.eu/sustainable-finance-taxonomy/home

^[3] https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities_en

Our statement

On June 5, 2023, NOVIS received a decision from the National Bank of Slovakia (NBS) to revoke its insurance license. NOVIS has reviewed the decision signed by the NBS governor, Mr. Peter Kažimír, and is surprised by the number of errors it contains. 

Moreover, all the evidence that NOVIS submitted to the NBS was ignored. This even includes the expert opinion of a court expert from Vienna, who asserts that the NBS distorted the Solvency balance of NOVIS to such an extent that the expert used the term 'falsification' in relation to the NBS procedure.

NOVIS is convinced that the NBS decision is incorrect and based on a flawed assessment of the facts and incorrect application of the relevant laws. The insurance company is therefore preparing an administrative lawsuit and will ask the court to postpone the effectiveness of the decision. NOVIS expects a fair process from the court, especially given that several important documents were deliberately not made available to it during the proceedings before the NBS. NOVIS repeatedly for a long time pointed out the proven bias and illegal actions of specific NBS officials, and therefore also turned to the General Prosecutor's Office.

In accordance with this decision, NOVIS is not authorized to conclude new insurance contracts, but nothing changes for existing clients, they still have valid agreed insurance coverage as well as the obligation to pay premium.

More important information:

• Press Release: National Bank of Slovakia Revokes License of NOVIS Company (Author: NBS)
• NOVIS Company - Frequently Asked Questions (Author: NBS)

Improving access to prevention, correct information, and treatment is one of the objectives of the insurance world, especially for diseases such as ovarian cancer which are scarcely discussed and typically diagnosed late.

It represents the eighth most common neoplasm in women worldwide, but the causes leading to its occurrence are still unknown. Ovarian cancer^[1] accounts for about 3.4% of all women’s cancers worldwide, with a higher incidence in high- and very high-income countries (7.1%) than in middle- and low-income countries (5.8%).

Yet it is rarely discussed, so much so that according to the World Ovarian Cancer Coalition, most women have little or no knowledge of the risks, symptoms, and dangers that ovarian cancer entails.

Often, moreover, non-authoritative information found on the web can be misleading. The correct information is, however, essential to detect symptoms early and, consequently, speed up diagnosis times.

That is why every year on 8 May, on World Ovarian Cancer Day, leading organizations supporting ovarian cancer patients unite to raise global awareness about one of the most severe cancers affecting women.

Ovarian cancer: the challenge of speeding up diagnosis time

“Ovarian cancer” refers to numerous types of cancer affecting the ovaries, fallopian tubes, and the thin inner lining of the abdomen. The exact cause of ovarian cancer is not yet known, but there are risk factors that may increase the likelihood of its occurrence.

One particularly decisive factor is the mutation of the BRCA1 and BRCA2 genes, which produce proteins capable of blocking the uncontrolled spread of cancer cells.  Generally inherited, a BRCA1 and BRCA2 mutation leads to a predisposition to developing ovarian, breast, and prostate cancer more frequently than in the general population.

Age is also a risk factor^[2] because about 8 out of 10 cases are diagnosed in women over the age of 50, mostly after menopause. Lifestyles also matter, from alcohol use to smoking to body weight.

Unfortunately, ovarian cancer is one of those diseases which are rarely diagnosed early, as the absence of specific symptoms and the lack of information regarding the neoplasm tend to result in it being discovered at an advanced age.

This represents a major problem: when the disease is discovered early, 5-year survival is 90%, whereas if the diagnosis is made at an advanced stage (as in 75-80% of cases), 5-year survival drops to 30-40%. 

Among the reasons for late diagnosis are the difficulties associated with screening for this type of cancer. Internationally, the available screening options are rather limited and mostly accessible only to women considered to be at higher risk, i.e. those with a significant family history of breast or ovarian cancer, or with a known genetic predisposition, such as Lynch syndrome or BRCA gene mutations.

The rest of the global female population relies on the symptoms of ovarian cancer being recognized early, which, however, often occur subtly or not at all until the tumor is advanced. For this reason, the adequacy of diagnosis, staging, and treatment is crucial to improve long-term prognosis.

Why the insurance world can help speed up diagnosis times

The insurance industry has always been attentive to changes in society, possible risks that may arise, and innovations that may help to overcome certain critical issues.

This also includes the focus on health issues, which directly affect people's lives and, consequently, society as a whole.

Medical advances, for example, provided the basis for the wording of the first policy for people with HIV in Italy, to which NOVIS made its contribution, laying the foundations for a more inclusive society.

Similarly, World Health Days dedicated to particular diseases are an opportunity to disseminate correct information on symptoms, diagnosis, and treatment, which can help improve prevention and, consequently, people's lives, mitigating the risks to which they may be exposed.

Today, incidentally, health is no longer “exclusive” to insiders, as the advent of the web has led to so much information being made available to people, who are, however, unable to check its accuracy. As a matter of fact, various different stakeholders are now talking about health, not all of them authoritative and credible, but for those without technical expertise, it is difficult to distinguish the truth from the false.

There is a serious risk of fake news undermining the professional, serious work done by doctors and scientists: Covid was one example, but the problem cuts across different areas.

Days like the one on 8 May are very important for bridging the misinformation gap, but authoritative sources need “sounding boards” close to the people. In this way they can bring correct and verified messages to as many people as possible and inform them of services accessible through insurance, providing medical advice that is otherwise difficult to obtain quickly.

In this task, the insurance industry can make its contribution by facilitating access to services such as the Second Medical Opinion, which can be instrumental in detecting the disease early on, to ensure rapid treatment.

^[1] https://acsjournals.onlinelibrary.wiley.com/doi/epdf/10.3322/caac.21660

^[2] https://www.issalute.it/index.php/la-salute-dalla-a-alla-z-menu/c/carcinoma-ovarico#cause

Always attentive to new opportunities emerging on the market and the need to diversify portfolios with a view to sustainability, NOVIS launched a fund in 2022 to allow investments in companies that produce clean energy. 

Sustainability is one of the drivers that has changed the financial world the most in recent years. Increased public awareness of critical environmental issues has, in fact, led to a greater awareness of the need for everyone to play their part, through their own choices.

In the financial sphere, this has resulted in increased demand for sustainable investments, in line with ESG criteria, in order to channel more capital towards companies that pay more attention to environmental and social impacts.

Europe itself is encouraging this turnaround, as the injection of private capital is crucial to achieving the ambitious goal of climate neutrality.

Aware of the important role that finance can play in channeling capital to support the ecological transition and how this can open up new opportunities for investors, NOVIS, a European insurance company specializing in life insurance, launched a fund in 2022 for those who wish to diversify their portfolios by investing in the ecological transition, one of the cornerstones of the European strategy to achieve climate neutrality.

Clean energy: investing with the NOVIS fund

Moving away from fossil fuels means reducing greenhouse gas emissions, so being able to produce energy using clean sources will allow production to continue while limiting the impact on the environment.

Compared to the different challenges of the ecological transition, the green energy challenge is among those witnessing significant progress in terms of available technologies. For this reason, it offers investors not only the possibility to diversify their portfolios by including assets that respect ESG criteria but also to seize interesting opportunities emerging from the market.

The insurance fund NOVIS Sustainability Plus aims at this double objective; launched in August 2022, it joined the Sustainability Insurance Fund which promotes environmental and social features in line with the Sustainable Development Goals (SDGs) defined by the United Nations.

The Sustainability Plus fund invests directly or indirectly in equities or bonds with a requirement of at least 45% of assets in energy-related companies without negative impacts on the environment (clean energy), such as the release and emission of greenhouse gases into the atmosphere like carbon dioxide. In addition, at least 45% of activities must be invested in the sustainable use of marine resources for economic development, improved livelihoods and employment, and preserving the well-being of the marine ecosystem (blue economy).

How green energy companies are selected

At a time when sustainability criteria are still being defined internationally, managers have a key role in choosing and managing assets that follow ESG criteria.

As far as Sustainability Plus is concerned, investments in clean energy are made through the underlying iShares Global Clean Energy UCITS ETF, which invests in companies engaged in the production of clean energy or the provision of green energy technologies, both in developed countries and emerging markets. Companies that exceed their emissions from coal use are excluded.

The fund is managed by BlackRock Asset Management Ireland Limited. It is an authoritative manager, recognized as one of the world’s leading asset managers, with a proven track record also in sustainable investments.

As a guarantee for investors, there is also the assessment of Morningstar, which, in recent years, has defined criteria for assessing the actual sustainability of the numerous funds on the financial market. In particular, according to the Morningstar Sustainability Rating, which assesses how well portfolio companies are managing ESG risks compared to other funds in the same Global Category, iShare Global Clean Energy has a rating of 4 out of 5 (rating up to date as of 31 January 2023).

The NOVIS fund, therefore, qualifies as a solution for those wishing to support the energy transition by seizing existing opportunities and diversifying their portfolio.

The relatively widespread occurrence of diseases may impact insurability under life insurance policies. However, advances in medical and scientific research may change this state of affairs, HIV being a case in point. 

The history of mankind has been periodically marked by epidemics, resulting from contamination by invisible enemies – viruses – circulating through trade routes and normal, everyday people-to-people contacts. These have plunged entire populations into terrible circumstances.

The COVID epidemic was the latest, but going back in time equally terrible events can be noted. Think, for example, of the “Spanish flu”, which caused millions of deaths as it spread over two years, or the Black Death of the Middle Ages.

Advances in medicine and the increased focus on prevention, starting with hygiene practices and healthier living conditions, have reduced the frequency of epidemics or pandemics, but not caused them to disappear, so much so that the World Health Organisation is already predicting new ones.

The sense of increased vulnerability increases people’s demand for protection. It is no coincidence that, after COVID, there was a surge in applications for life insurance policies. How does the insurance world deal with high-frequency diseases?

Health, epidemics and insurance protection

The insurance world is, by its very nature, concerned with protecting against emerging risks that may cause personal injury.

Health falls within this scope, so much so that there are ad-hoc insurance solutions to help those affected by accidents or illnesses to support treatment and supplement their income in the event of inability to work, in a way that complements what is provided by the public health system.

Even in the case of epidemics, when the demand for insurance coverage increases, the insurance world tries to meet the demand, while trying to safeguard the balance between premiums and coverage should the insured event occur.

In order to maintain this balance, the conditions for the insurability of the risk must be met.

This means that the loss, however significant, must be definite, that the event causing the loss must be accidental and not influenced by the insured’s will, and that the probability of the loss must be foreseeable.

In the case of epidemics, the latter aspect, i.e. the probability of a loss, is diminished, because the spread of the virus no longer follows a physiological pattern.

With COVID, for example, a discussion emerged on the possibility of providing life insurance for pandemic risk. The topic is still under discussion, although initial analyses worldwide seem to suggest, for the time being, that this hypothesis is unrealistic.

The magnitude of an event such as COVID, for example, would make the probability of a loss unforeseeable, thus negating one of the conditions of insurability. Moreover, in the absence of treatment options, the insurance world may not be able to cope with the eventual compensation requested.

The situation is totally different, however, if there is a cure that reduces the risk of mortality, as was the case with another epidemic, that of HIV.

The impact of medical advances on insurability: the case of HIV

In the 1980s, the world witnessed the spread of the HIV virus. This virus can lead to the development of AIDS, a syndrome that can occur even several years after infection and which causes the immune system to shut down, making the body lose its ability to fight even the most mundane infections. Since it began in 1982, AIDS is estimated to have caused 35 million deaths worldwide.

The improved knowledge of transmissibility factors has led to a reduction in the number of new diagnoses over the years: from a peak of 3.2 million new infections in 1996, it fell to 1.5 million in 2021.

The other great victory was the ability of medical-scientific research to study anti-retroviral therapies capable of blocking the virus in HIV-positive people, preventing the development of AIDS. By late December 2021, 28.7 million people living with HIV had access to anti-retroviral therapies, representing 75 percent of the total, while 81 percent of pregnant women had access to anti-retroviral therapies to prevent transmission of the virus to the unborn child.

Not only that: in recent years there have been cases of people recovering from the virus^[1].

Advances in treatment also have a tangible impact on the possibility of insuring the lives of people with HIV, as by making the probability of risk foreseeable, the conditions of insurability necessary to ensure concrete and sustainable cover are fulfilled, paving the way for the first insurance solutions dedicated specifically to HIV-positive people.

^[1] https://www.forbes.com/sites/tylerroush/2023/02/20/5th-man-cured-of-hiv-after-stem-cell-transplant/

Created in 2013, the Gold Insurance fund invests in funds traded on the gold exchange, to offer investors and savers an opportunity to access this sector to diversify their portfolio. 

The investment process is a journey of choices that can change over time, depending on one’s personal life situation, but also on external conditions influenced by major international scenarios. The last few years have been a prime example in this regard, in that macroeconomic dynamics were profoundly altered by the pandemic followed by the war in Ukraine, which also impacted investment choices.

Therefore, one of the strong messages when planning and constructing one’s portfolio is to diversify one’s assets, not only in terms of quantity but also in terms of exposure to possible risks, which should be as decoupled as possible.
This means that it may be appropriate to allocate a share of investments to assets that have historically proven to be anti-cyclical because their value increases in times of heightened market volatility or turbulence.

One such asset is gold, which, not surprisingly, is considered a safe-haven asset par excellence. This is despite not being easy to access, given that it presents several barriers to entry for non “insiders”.

To also offer investors and small savers the option of including this opportunity in their portfolios, NOVIS, an international insurance company, has created the internal Insurance Gold fund, which is specifically linked to gold.

Insurance Gold, what the NOVIS Fund is

Created in 2013, the Fund aims to achieve a long-term return higher than the inflation rate by allowing investors – including retail investors – to access the gold market.

The focus is gold ETFs (exchange-traded funds), whose change in value is linked to the change in gold prices: these funds replicate the price of this commodity.

The Fund itself cannot hold precious metals or physical gold, but its underlying assets can, on which the return on investment and the value of the investment largely depend.

The portfolio structure is not fixed but can change over time depending on market conditions. Specifically, the Gold Insurance Fund invests:

• up to 100% Gold ETFs, with a preference for liquid ETFs; these are denominated in euros or US dollars and managed by companies recognized for their robustness, authority, and transparency;
• up to 20% in bank deposits, in banks within the European Economic Area, established for at least one year.

The underlying asset is the SPDR® Gold Trust, an investment trust established in 2004 that holds gold and periodically issues shares (SPDR® Gold Shares) against deposits of gold (one basket equals 100,0000 shares). The Trust’s investment objective is for the shares to reflect the performance of the gold bullion price, excluding the Trust’s expenses.

NOVIS’ choice fell on this entity because of the proven experience and international authority of the entities that handle the Trust. World Gold Trust Services is the promoter, while BNY Mellon Asset Servicing, a division of The Bank of New York Mellon, is the Trustee of the Trust, and HSBC Bank plc is the custodian, handling the logistics of storing and insuring the gold.

More accessible gold market

NOVIS’ Insurance Gold Fund offers investors the opportunity to participate in the gold market, which has historically been inaccessible to retail investors and savers and, in general, to those without long-standing experience in this area.
The possibility of buying through the correct channels (there have been many attempts to defraud by counterfeiters), but the storage, maintenance, and insurance of physical gold represent a major barrier to entry due to the costs and logistics involved, which require stable arrangements reinforced by experience.

An instrument such as NOVIS’s Gold Insurance Fund, however, is a solution that breaks down these barriers, making the opportunity to invest in the gold market accessible and cost-efficient, as the expense associated with the investment is, in any case, lower than what it would take to buy, store and secure gold bars.
Furthermore, maximum transparency is ensured, as the Trust does not hold or employ derivatives, and all of the Trust’s holdings and their value based on current market prices are reported on the Trust’s web site every business day.

As it is in its DNA, NOVIS, therefore, allows you to benefit from the opportunities to diversify your portfolio with gold investments and preserve your capital, especially in times of economic uncertainty and raised inflation.

The European Union's Energy Performance of Buildings Directive has opened up a wide debate in Europe on when and how to implement it, as has already happened with the phase-out of the endothermic engine from 2035. These cases illustrate the critical nature of such an epoch-making change as the energy transition, but it is also opening up new investment opportunities. 

From extreme events to droughts, the evidence of climate change has resulted in Europe outlining a very clear path to decarbonization, favoring an economy based on renewable energy sources and a development model that is more focused on sustainability. The urgency of doing this has been reinforced by the war in Ukraine, which has shown how energy dependence on one country (Russia) exposes the entire socioeconomic system to the volatility of geopolitical issues.

While the shared goal of sustainability has been outlined, how to achieve it is proving to be more divisive than expected, as demonstrated by the debate on so-called “green homes” that are currently taking place within Europe.

Green housing: what the European directive envisages and why it is controversial

The Energy Performance of Buildings Directive is one of the components of the “Fit for 55” package, the European Union’s plan to reduce emissions by 55% by 2030 to come closer to climate neutrality.
One of the pillars for this transformation is energy efficiency which, inevitably, also comes through buildings. This is because, according to the European Commission, buildings are responsible for 40% of energy consumption and 36% of direct and indirect energy-related greenhouse gas emissions.

What does the standard provide? The content is still being developed and the final content will probably be ready by the summer of 2023. The key points in the draft legislation prepared by Brussels, however, include the new definition of “zero-emission buildings” (ZEB), replacing “nearly zero-energy buildings”. In other words, we are talking about buildings that can function and ensure maximum comfort by comprehensively eliminating emissions emitted during the building’s life cycle, through energy efficiency and renewable sources which should also power household appliances.

The ideal goal would be to have a completely zero-emission building stock in Europe, as quickly as possible.  In the Commission’s first draft, for example, all public and non-residential buildings were scheduled to reach class F in January 2027 and class E in January 2030, while for residential buildings the deadlines were January 2030 for class F and January 2033 for class E.

However, these wishes clash with the realities of different countries, which have a highly diverse building stock. Those with significant percentages of buildings in low energy classes are trying to bargain for more “accommodating” thresholds and timeframes (in particular, countries such as Italy, Greece, Poland, Sweden, and Slovenia).

The latest text says that by 1 January 2030, all residential buildings will have to be in energy class E, and by 2033 they will have to be in class D, to achieve zero emissions by 2050. However, sanctions will be decided by individual States.

The negotiations are not yet over. From 13 to 16 March, the draft is expected to reach the plenary session of the European Parliament and will become the basis for negotiations held by each Member State before reaching the final version.

The energy transition, from uncertainties to opportunities

The events surrounding “green housing” are an example of what is likely to happen during the energy transition and the ecological transition in general.
Transition inevitably leads to changes in long-established and entrenched paradigms and development models, forcing a profound transformation of the economic system. In the short term, this could also lead to negative impacts on entire sectors on which the transition will have the greatest impact.  A further example is the phase-out to the endothermic engine from 2035, criticized by some countries for being implemented too quickly: the concern is that companies will have little time to convert.

These events represent the double face of the ecological transition. On the one hand, negotiations to revise measures and targets will be a constant in the coming years, to reconcile environmental objectives with social, economic, and territorial cohesion objectives.

On the other hand, however, the road to greater sustainability is inevitable and there will be no turning back. This is opening up new opportunities for investors because in order to change the development model, public resources will not be enough: funding channels will also be needed from the private sector. This is opening up new prospects for retail investors who, through solutions focused on clean energy, can contribute to the transition and take advantage of emerging opportunities, while diversifying their portfolios with a view to sustainability as well.

Among the innovations introduced by the international insurance company is the option of suspending premium payments while keeping the insurance coverage in place, to cope with unforeseen changes.

Medium- and long-term planning of one’s asset management is crucial in deciding whether and how to invest and how to integrate investment and insurance protection. On the other hand, however, uncertainties are unavoidable, because life can involve unpredictable events or certain situations that simply change, disrupting plans and changing priorities.

To support customers throughout their life cycle, international insurance company NOVIS has always introduced innovations to make insurance solutions flexible so that they can evolve in parallel with people’s needs.

Innovations in Insurance: suspended premium, warranty unaffected

NOVIS’s approach has always been characterised by the desire to act as a single point of contact for customers, both for insurance protection and for the option of investing in widely diversified internal funds capable of seizing emerging opportunities.

This has led to the development of solutions with a medium- to long-term timeframe, which allows investment risks to be mitigated and provides broad-based protection.

On the other hand, life situations can change over the years, altering the initial conditions under which the choice to build one’s investment portfolio was made.

One of the most common situations is the variability of people’s employment status, especially in the face of contemporary labour market dynamics. These are characterised by profound changes triggered by COVID and demographic dynamics. Compared to the past, when career paths were stable and predictable, today the world of work is distinguished by flexibility, which implies opportunities for change to pursue brighter careers, but also relatively long periods of lay-offs.

The fear of not being able to meet the commitment of an investment on a consistent basis may discourage one from starting the investment, leading to missed opportunities in terms of asset protection and growth. Therefore, NOVIS has designed a solution to respond to a widespread fear that may lead to irrational choices, by introducing premium suspension into its products.

This is a mechanism whereby the policyholder who has chosen a recurring premium plan may request to suspend the payment of the scheduled premium, starting as early as the first month of the contract^[1]. This choice, which may be dictated, for example, by a sudden change in one's employment situation, does not cause the validity of the contract to lapse, so the insurance covers remain in place for the accumulated capital share.
If, for example, the policyholder dies during the suspension period, the company will pay the beneficiaries the sum insured, equal to the value of the contract at the time of death, and the sum insured in the event of death.

At any time, the policyholder may resume premium payments, choose to supplement them with additional premiums or exercise the surrender option.

Flexibility for every need

The option of suspending the premium, provided for in most NOVIS solutions, is an option that introduces flexibility into insurance products, making investing more accessible to anyone who wants to build up assets over time, realise their plans and protect their loved ones.

Thus NOVIS confirms its willingness to stand by people as a single point of contact for both insurance and finance.

Depending on one’s profile, one can choose the most suitable NOVIS solution to meet capital preservation or growth needs or to invest sustainably, through internal funds that apply maximum geographical, sectoral, and currency diversification.

In addition to investment opportunities, an option such as premium suspension allows one to adapt one’s portfolio to changing life situations, reconciling the need for security with the possibility of seizing opportunities in the financial markets.

^[1] Technically, the recurring premium instalment due shall be deducted from the Initial Single Premium and, likewise, for the subsequent recurring premium instalments, until the policyholder pays the recurring premium instalments under the Recurring Premium Plan.

According to the experts, rates will continue to rise at a slower pace than in 2022, while we will have to wait until 2024 to see a reduction. What scenarios are opening up for investors? 

On the financial side, 2022 was marked by the first interest rate hike decided by the European Central Bank after a decade in which rates had been kept at deficient levels through the purchase of government bonds.

 In July^[1], however, the Governing Council of the ECB decided to raise the three key interest rates by 50 basis points, “in line with its strong commitment to fulfilling its mandate to preserve price stability”. For the same reason, another even sharper intervention followed in September(+75 basis points), after which came a rise of 50 basis points in December. The same happened on the other side of the ocean, where the Fed also revised its interest rate policy.

In the new year, analysts and observers are waiting to see what the next moves of the European and US central banks will be. Monetary policy has an impact on the economy and, consequently, becomes one of the variables that investors have to take into consideration when planning their asset allocation.

Monetary policy: the impact on the economy

Monetary policy is the set of money supply and interest rate choices that are generally made by a state’s central bank to achieve economic policy objectives.

In Europe, with the Economic and Monetary Union, the Member States have delegated this task to a single institution in practice: the European Central Bank. As clearly stated^[2], it has the principal task to keep prices stable, in favor of economic growth and employment.

As explained by the ECB itself, in fact, its objective is solely to “preserve price stability by ensuring that inflation remains low, stable and predictable”. The mission is to achieve an inflation rate of 2% in the medium term. “We pursue this goal symmetrically: for us, overly low inflation is just as bad as overly high inflation” explains Europe’s top banking supervisory body.

When a recession or crisis marks the economic environment, as was the case after 2008–09 and after 2012, the response of central banks is usually to adopt an expansionary monetary policy. By reducing key interest rates and buying securities, and through soft loan schemes and open market operations, central banks help to keep government bond rates low and stimulate liquidity to encourage consumption and business investment.

Conversely, when inflation is excessive or prolonged, as has been the case since 2022, prices rise so high that they erode the purchasing power of households and businesses. At this point, the central banks intervene to curb the price run with a restrictive monetary policy, which reduces the amount of money in circulation by reducing the direct purchase of securities and raising interest rates.

Balance is the key word here: an overly expansive monetary policy can, in fact, lead to excessive inflation in the medium term, while one that is too restrictive can trigger a downward spiral on the economic growth front, holding it back.  

Why central bank decisions also affect investments

In fact, monetary policy plays an important role in economic system trends, households’ and companies’ access to credit, trade, and – directly and indirectly – also financial markets.

Interest rate policies influence the cost of money, and thus also the cost of public and private debt. On the financial side, this has an impact, for example, on government bond yields and, therefore, on the choice between bonds and equities when making asset allocations.

Central bank policies also condition currency exchange ratios in international markets, because higher interest rates attract foreign capital as they offer higher yields than other countries, leading the reference currency to rise. This aspect, therefore, has to be assessed with a view to the geographical and currency diversification of one’s investment portfolio.

Another key aspect is the ability of monetary policies to maintain economic stability. As explained by the Central Bank itself^[3], “the financial system benefits from price stability: it is easier for citizens and companies to plan and invest knowing that prices will not change much over time”.
A symbolic case is the 2008 financial crisis, which, by disrupting the flow of money in the economy and creating unstable financial markets, led to an unstable system in which citizens and businesses struggled to access finance and, consequently, to restart the real economy. Therefore, the ECB in Europe and the Fed in the US have adopted an expansionary policy to help keep prices stable, helping the economy and the financial system to recover.

Now the international conditions are different from 2008 but no less complex. In a situation still feeling the effects of COVID, rising energy costs, and geopolitical instability, the financial market is looking closely at the policies of the ECB and FED to see if and how much they will be able to intervene to create stable conditions.

According to forecasts^[4], the ECB should continue to expect a further increase in rates in 2023, albeit reduced compared to 2022, while only in 2024 could this lead to a reduction, if the measures taken in this two-year period have had their full effect and inflation has come down towards 2%.

Will this be enough to maintain market stability, considering that there are many variables affecting the stability of the system?
Certainly the rise in rates, despite being smaller, indicates that the top banking authorities still expect inflation to rise in 2023, against which solutions focused on assets such as gold – a safe haven asset par excellence – may allow portfolio diversification consistent with their objectives of capital preservation and enhancement.

^[1] https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.mp220721~53e5bdd317.it.html

^[2] https://www.ecb.europa.eu/ecb/tasks/monpol/html/index.it.html

^[3] https://www.ecb.europa.eu/home/search/review/html/monpol-financial-stability.it.html

^[4] https://www.bloomberg.com/news/articles/2023-01-30/ecb-rates-march-in-focus-after-half-point-hike-assured-this-week

Career prospects and dynamics play a crucial role in financial planning, as they impact on available incomes and the need for protection. After COVID, big changes are taking place in the European labor market. Let's take a look at them. 

Work is one of the cornerstones that guide most of the important choices everyone must make throughout life. One's educational path, for example, is normally focused on acquiring the skills relevant to a certain type of profession, just as the timing of certain personal choices, such as starting a family or buying a house, is dictated by career developments.

Financial planning and investment choices are also closely linked to work dynamics. Indeed, one's current and future earning capacity depends on work, since pensions are also calculated based on the income received during working years.
A young person who has the prospect of finding employment and access to stable, growing incomes will tend to make different investment choices – probably more oriented towards enhancing the value of assets than safeguarding them – than someone working in an employment market that provides no guarantees of stability.

For this reason, when constructing an investment portfolio, it is also useful to consider the individual's present employment situation and future prospects, bearing in mind that these depend not only on the individual's abilities but also on the environment in which that individual lives. In a globalized world, this is no longer simply a local or national matter but must extend to at least the European level.

Labor in Europe: the impact of COVID

International mobility, the result of the harmonization policy between European states, has helped to create a labor market that, if it cannot be called European, is nevertheless integrated across different countries of the Old Continent.

The European Commission, which monitors labor mobility between Member States, noted in its latest available report how the number of Europeans who live and work in another European country is steadily increasing: in 2019, 17.9 million Europeans resided in another EU country, 13 million of whom were of working age^[1].

One cannot, of course, overlook the impact of the pandemic, which has affected all countries and Europe as a whole. Before the economic impact of the COVID-19 crisis began to make itself felt, the labor market recovery in Europe was bringing the EU employment rate closer to the 75% target set by the EU2020 strategy.

A very detailed picture of the impact of COVID on the labor market in Europe was provided by Eurofound, European Foundation for the Improvement of Living and Working Conditions, in its publication "Recovery from COVID-19: The changing structure of employment in the EU" ^[2]. According to the analysis, COVID came to an abrupt halt, but the recovery was rapid, helped by policy interventions and public support at both national and European levels. In particular, employment levels in Europe have returned to pre-crisis levels in two years, compared to almost eight years after the 2008 financial crisis.

However, there were large disparities between sectors. While employment in hotels and restaurants, wholesale and retail trade, and transport recorded a cumulative loss of 1.4 million workers between 2019 and 2021, the information and communication sector added 1 million jobs during the same period.

Although job losses during the pandemic were concentrated in low-paying jobs, the upturn in employment levels in 2021 was driven by growth in well-paid jobs and occupations. Throughout the period 2019-2021, increases in well-paid jobs were greater among women than men in the EU27, while at the same time, job losses were more acute for women in low-paid jobs.

According to Tina Weber, Head of Research at Eurofound, Employment Unit: "There are still six out of ten people who are on open-ended, non-time-limited contracts. Although the figures for "atypical work", i.e. part-time and fixed-term employment, have not really changed in the last five to ten years, they belie a trend towards more precarious forms of work and people with precarious contracts do not have the same access to employment or social protection".

Aging population

The legacy of COVID is thus greater inequalities between well-protected workers and workers with limited access to social protection and employment rights.

This trend dovetails with another macro-trend, which has been ongoing for some time, namely the increasing age of the population. This poses many challenges in relation to employment, working conditions, living standards, and welfare, as it gives rise to concerns about the sustainability of pension systems and labor supply. In 2016^[3], the employment rate of older workers aged 55-64 in the EU stood at 55.3%, compared to 66.6% for those aged 15-64, where the largest increase was among women.

The European statistics^[4] show how demographic dynamics have already significantly altered the European labor market, with a steady growth in the portion of employed persons between 55 and 64 years old(12.5% were in this group in 2009, and 19% will be in 2021) and a decrease in the proportion between 15 and 24 years old (9.2% in 2009, 7.8% in 2021).

In the long run, the trend shows that the 55-64 age group is tending to grow and be less volatile than younger workers, even in the 2020 COVID years.
What will the future look like? In order to maintain the sustainability of the system, flexible forms of retirement are being considered, providing the opportunity for prolonged employment. The risk otherwise is that the burden of welfare spending will put a strain on the welfare system.

In a context of increased precariousness and possible reduced protection from the public system, financial planning is presenting an opportunity to build forms of supplementing labor income and pensions, with solutions that make investment accessible through customization based on income capacity, and that facilitate it even in periods of job insecurity.

^[1] https://ec.europa.eu/social/main.jsp?langId=en&catId=89&furtherNews=yes&newsId=9877

^[2] Eurofound (2022), Recovery from COVID-19: The changing structure of employment in the EU, Publications Office of the European Union, Luxembourg https://www.eurofound.europa.eu/sites/default/files/ef_publication/field_ef_document/ef22022en.pdf 

^[3] https://www.eurofound.europa.eu/it/topic/ageing-workforce

^[4] https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Employment_-_annual_statistics#Impact_of_the_COVID-19_pandemic_and_recovery

NOVIS' approach has always been to support customers throughout their lives, adapting products to their evolving needs. Flexibility is also crucial for dealing with the international backdrop of uncertainty.

As was the case in previous years, 2023 could also be a year characterized by uncertainty at the global level, as the effects of the war in Ukraine, rising energy prices, and inflation will continue to be felt, also affecting the financial markets. How should investments be dealt with in this context?
A keyword is flexibility, i.e. the ability to adapt the portfolio to the contingency of the moment, so as to keep the investment in line with one's objective and risk profile.

This is a feature that NOVIS has always included in its products.

Adaptability to scenarios: the NOVIS approach

Since its inception, NOVIS, an international insurance company specializing in life insurance, has always been committed to developing products that can support investors throughout their lives.

This has led to the development of insurance and investment solutions capable of adapting to changing needs and requirements, which vary with age, career progression, family dynamics, and health-related care needs.

To be able to manage the many variables that may arise in its life cycle, NOVIS has introduced important elements of flexibility into its products, which enable it to align the mechanisms of investment – which naturally have their own dynamics in relation to the financial markets as well – with the needs of the investor.

Any examples?

On the insurance front, in addition to the possibility of choosing between annuities or a lump sum, NOVIS products make it possible to add insurance coverage or insured persons without restrictions on numbers as the family situation evolves. This makes it possible to maintain the same insurance solution over time, increasing the number of beneficiaries and insured persons without administrative costs (only the premium is adjusted) and without entering into new contracts.

Investment flexibility with NOVIS

In strictly financial terms, NOVIS has a diverse range of funds from which investors can choose to define how assets are to be allocated at the start of the contract, according to their investment profile. However, changes can be made each month to the allocation of insurance funds, by adapting one's portfolio to financial market trends in line with one's objectives and profile.

An invaluable ally in this respect is the Switch, designed by NOVIS to give the option of divesting initially subscribed units in full or in part at an early stage and reinvesting them in another internal fund for the corresponding counter value. With Switch, it is thus possible to make a long-term investment flexible, maintaining the same investment solution within a diversified portfolio. However, it can be changed over the course of a lifetime.

Portfolio diversification, a broad time horizon, and flexibility tools, such as those devised by NOVIS, along with expert advice are the key to navigating a constantly changing scenario and not giving up emerging opportunities while continuing to pursue long-term goals.