Financial Service Regulation and Compliance - Insurance February 2019
Financial Service Regulation and Compliance - Insurance February 2019
Government publishes Brexit Omnibus Bill
On Friday 22 February 2019, the government published the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Bill 2019 (the Bill). Insurance arrangements in the event of a no-deal Brexit are covered at Part 8 of the Bill. This section proposes to amend both the EU (Insurance and Reinsurance) Regulations 2015 and the EU (Insurance Distribution) Regulations 2018). This Bill provides for a temporary three-year run-off regime for UK and Gibraltar based insurers and insurance intermediaries, during which time no new insurance contracts can be written but existing contracts can be serviced. The Bill is expected to progress to Committee Stage in the week commencing 4 March 2019.
Deputy Governor of the CBI presents speech at CBI Insurance Conference
On 15 February 2019, Ed Sibley, Deputy Governor of the CBI, delivered a speech entitled "Thriving in Challenging Times" at the CBI Insurance Conference. Topics addressed included (among other matters):
the upcoming review of Solvency II
the importance of culture and diversity in insurance firms
the importance of resilience for the insurance industry
the expected impact of Brexit on the resilience of insurance firms
CBI publishes latest edition of the Intermediary Times
On 28 February 2019, the CBI published the latest edition of its Intermediary Times newsletter. This edition covers a range of topics including: an update on draft legislation regarding the withdrawal of the UK from the EU; the steps UK insurance intermediaries must take in the event of a "hard" or "no deal" Brexit; errors and reporting requirements under the Consumer Protection Code and intermediaries' annual reporting obligations.
EIOPA issues Recommendations for the insurance sector in light of the UK withdrawing from the EU
On 19 February 2019, EIOPA published Recommendations for the insurance sector in light of the United Kingdom withdrawing from the European Union (the Recommendations). The Recommendations are addressed to Member States and aim to promote consistent supervisory practices in the treatment of UK and Gibraltar based insurance undertakings and distributors across Member States post-Brexit. EIOPA makes nine recommendations in total across areas such as: run-off; authorisation of third-country branches; portfolio transfers; change in habitual residence of policyholders; and distribution activities.
EIOPA publishes framework for identifying conduct risks
On 20 February 2019, EIOPA published a framework for assessing conduct risk throughout all stages of a product's lifecycle. The risks set out in the framework cover:
business model and management risks
product management risks.
EIOPA expects the framework to contribute to the effective implementation of its Conduct Supervision Strategy.
Solvency II Implementing Regulation – calculation of technical provisions & basic own funds
The European Commission adopted a new Implementing Regulation (EU/2019/228) on the calculation of technical provisions and basic own funds for the purpose of Solvency II reporting with reference dates from 31 December 2018 to 30 March 2019. The Implementing Regulation was published in the Official Journal of the EU on 8 February 2019 and it entered into force on 9 February 2019.
Insurance Europe publishes response to EIOPA consultation on technical advice on the integration of sustainability risks and factors on the delegated acts under Solvency II and IDD
On 1 February 2019, Insurance Europe (IE) published a response to the EIOPA consultation on technical advice on the integration of sustainability risks and factors on the delegated acts under Solvency II and IDD. IE states that Solvency II does not represent an obstacle to the integration of sustainability risks. With regard to EIOPA's proposals to amend specific elements of Solvency II, IE has called for consideration of proportionality in the proposed requirements. The response also welcomes clarification from EIOPA that insurers are required to consider environmental, social and governance (ESG) factors only in the product approval process for insurance products with an ESG profile.
European Commission requests EIOPA technical advice on Solvency II review
On 15 February 2019, EIOPA published a request from the European Commission for technical advice on the review of Solvency II. The Commission seeks EIOPA's advice on (among other matters):
long-term guarantee measures and measures on equity risk
specific methods, assumptions and standard parameters used when calculating the solvency capital requirement standard formula
rules and supervisory authorities' practices on the application of Article 129 (calculation of the minimum capital requirement)
the supervision of insurance and reinsurance undertakings in a group
Other parts of the Solvency II framework have been identified by the Commission (or by other stakeholders) as deserving reassessment including the supervision of cross-border activities. Apart from the Solvency II Directive, the scope of the review may extend to delegated acts and implementing regulations. EIOPA's advice is due by 30 June 2019.
European Commission publishes letters to EIOPA on Delegated Regulation amending Solvency II Delegated Regulation and country component methodology
On 11 February 2019, the European Commission published two letters to EIOPA. The first letter is in response to a letter sent by EIOPA in December 2018 in relation to the Commission's consultation paper on a Commission Delegated Regulation amending Solvency II Delegated Regulation ((EU) 2015/35). In the letter, the Commission acknowledges the necessity to address certain shortcomings in the current calibration for the interest rate risk module. The Commission favours revisiting the topic during the 2020 review of Solvency II.
The second letter (dated 7 February 2019) asks EIOPA to review the methodology for the activation of the "country component" of the volatility adjustment under Solvency II. The Commission is concerned that it does not work as intended and invites EIOPA to explore other possibilities to improve the functioning and efficiency of the country component of the volatility adjustment in line with the current Solvency II framework.
EIOPA publishes revised work programme for 2019
On 5 February 2019, EIOPA published its revised work programme for 2019. The work programme details the strategic objectives of EIOPA for 2019 which include:
strengthening conduct of business supervision
leading convergence towards high-quality prudential supervision throughout the EU
strengthening the financial stability of the insurance and occupational pensions sectors
delivering EIOPA's mandate in an effective and efficient manner.
The work programme also identifies InsureTech and sustainable finance as cross-cutting themes which EIOPA will assess and consider during 2019.
European Parliament publishes amendments to Commission proposal for a Directive amending the Motor Insurance Directive
On 13 February 2019, the European Parliament published amendments to the European Commission's proposal to amend Directive 2009/103/EC (the Motor Insurance Directive) in line with a REFIT evaluation carried out in July 2017. The Parliament proposes to exclude certain modes of transport from the application of the Motor Insurance Directive, where it would be disproportionate (for example, electric bicycles, segways and vehicles used for motorsports). The draft Directive has been referred back to the Council and Commission for interinstitutional negotiation.