Financial Service Regulation and Compliance - Insurance January 2019
Financial Service Regulation and Compliance - Insurance January 2019
Financial Services and Pensions Ombudsman (FSPO) publishes legal binding decisions
On 24 January 2019 the FSPO published 228 legally binding decisions. These decisions were issued throughout 2018 and include decisions involving insurers. This is the first time the FSPO has published its decisions. A detailed analysis of all decisions reached in 2018 will be included in the FSPO's 2018 Annual Review which is expected to be published in March 2019.
CBI issues Consultation Paper on a New Levy Calculation Methodology for Insurers
On 23 January 2019, the CBI published a consultation paper on a new levy calculation methodology for insurers. The purpose of the consultation is to elicit views on a new methodology for calculating the funding levy for insurance entities supervised by the CBI. The new methodology provides for a minimum fee component and a variable fee component. The objective is to ensure that levies are more proportionate, placing greater emphasis on the individual, or firm-specific characteristics and impact scores, rather than on the rating category assigned under the current approach. The consultation process will run from 23 January to 29 March 2019.
Brexit and Resilience are the key themes in Deputy Governor Ed Sibley's address to the BPFI Risk Management & Supervisory Conference
On 17 January 2019, Ed Sibley, Deputy Governor (Prudential Regulation) at the CBI, delivered a speech at the BPFI Risk Management & Supervisory Conference on Brexit and the resilience of the financial system. According to Mr. Sibley, while Brexit will generate uncertainty, most significant firms operating in Ireland across all sectors have, prepared and are executing contingency plans for a hard Brexit. However he cautioned that there will be consumer impacts. It was noted that the supply of niche insurance products may reduce or end altogether, given the increased costs and frictions of serving EU customers from the UK.
European Commission publishes draft Delegated Regulations on Environmental, Social and Governance considerations
On 4 January 2019, the Commission published draft rules obliging investment firms and insurance distributors to take sustainability issues such as Environmental, Social and Governance (ESG) considerations into account when providing advice to their clients. The Draft Regulations propose to amend existing delegated acts under the Markets in Financial Instruments Directive (MiFID II) and the Insurance Distribution Directive (IDD).
The Commission can only officially adopt the draft regulations once new disclosure provisions for sustainable investments and sustainability risks have been agreed at EU level. The draft regulations will enable investment firms and insurance distributors to prepare to take ESG considerations into account.
Insurance Europe publishes brief on how Big Data can benefit consumers
The brief outlines how policyholders may benefit from the use of Big Data in the insurance industry. New data mining techniques will allow European insurers to pass on benefits to consumers resulting in products that can be better tailored to the consumer's needs and at more competitive rates. It will also allow increased access to insurance (for risks that otherwise would be uninsurable) and better prevention measures to mitigate risks.
At present, there is no specific regulation targeting the use of Big Data. There are a number of applicable rules existing at EU level including: the EU General Data Protection Regulation, the Packaged Retail and Insurance-based Investment Products Regulation and the IDD. Insurance Europe does not currently see a need to introduce a specific regulatory framework for the use of Big Data as in its view, the current regulatory framework is sufficient for that purpose. It advocates a monitoring approach and notes that any future regulatory framework should be supportive of innovation.
Proposal for a Directive of European Parliament and of Council amending Directive 2009/138/EC (Solvency II)
The European Parliament has issued amendments to a proposal for a Directive of the European Parliament and of the Council amending Solvency II. It notes that there are inconsistencies under Solvency II with regard to the requirements of competent authorities and the supervision and agreement of internal models. The proposal aims to promote supervisory convergence by enhancing EIOPA's role regarding internal models, introducing new provisions on co-operation and information sharing. It also aims to give EIOPA new powers to adopt Opinions and contribute to the settlement of disputes between supervisory authorities.
EIOPA calls for evidence on integration of sustainability risks in Solvency II
On 17 January 2019, EIOPA published a call for evidence on the integration of sustainability risks and factors in the prudential assessment of assets and liabilities for (re)insurers under Solvency II. EIOPA hopes to collect market data to analyse how sustainability risks affect (re)insurers investments, with a particular focus on climate change, as well as data on market practices on insurance underwriting. National supervisory authorities will collect information from individual (re)insurers. The deadline for responses to this call for evidence is 8 March 2019.
EIOPA publishes report on cost and past performance of retail insurance and pension products
On 10 January 2019, EIOPA published its first report on costs and past performance of retail insurance and pension products for the period of 2013 to 2017. The report shows that costs vary depending on a number of factors including the type of product, premium, risk category and jurisdiction.
EIOPA concluded that the difference between products poses a significant challenge when attempting to compare performance. However, given data quality and comparability limitations, a significant portion of the sample could not be used and market coverage is limited. To address the issues with consistency and quality of data in the future, EIOPA plans to further develop common definitions of costs, as well as common methods of calculating past performance.
EIOPA publishes findings of its peer review on propriety of administrative, management or supervisory body members and qualifying shareholders
On 25 January 2019, EIOPA published the findings of its peer review examining how national supervisory authorities (NSAs) assess the propriety of administrative, management or supervisory bodies (ASMB) members and qualifying shareholders. EIOPA reviewed the regulatory frameworks and supervisory practices utilised by NSAs to assess propriety of ASMB members and qualifying shareholders at solo and group level at authorisation and on an on-going basis.
EIOPA also assessed the effectiveness of cross-border cooperation between NSAs. EIOPA's findings indicate that in certain cross-border scenarios, there is a lack of harmonisation regarding propriety assessment which leads to potentially different outcomes in different EEA countries. As a result of the review, EIOPA will seek to strengthen and support processes of cross-border assessment.