Financial Services Regulation and Compliance - Insurance Apr 2020
Domestic
Department of Finance announces common measures agreed by most insurers for business customers in response to COVID-19
Following engagement with the Department of Finance, a number of insurers in the Irish market have agreed to apply common measures to their business customers. Measures taken by insurers include (among other matters):
- reducing premiums for business customers to reflect reduced level of business
- allowing 28 days after renewal for payment
- maintaining cover for unoccupied commercial buildings/premises not in use due to COVID-19 restrictions
- supporting requests for a change of property use during the crisis
CBI prudentially supervises insurance and reinsurance firms
The Central Bank of Ireland (CBI) has reviewed its approach to regulatory flexibility in light of the COVID-19 crisis. On 24 March 2020 the CBI wrote to all (re)insurers and Special Purpose Reinsurance Vehicles offering a degree of supervisory flexibility in relation to certain reporting and disclosure deadlines. The CBI has also outlined that it expects (re)insurance firms that can meet the existing Risk Mitigation Programme deadlines to continue to do so. Supervisors will consider, on a case-by-case basis, whether to postpone the measures where (re)insures are having difficulty meeting deadlines.
Ministerial engagement with Insurance Ireland
On 17 April 2020, Minister Donohue held a teleconference call with Insurance Ireland to discuss insurers' participation in the recovery from the COVID-19 crisis. Key points highlighted by the Minister included:
- the application of common measures by insurers
- refunding part of consumers' motor premium package
- insurer engagement with the reform agenda of the next government, which will consider the cost and supply of insurance
European
EIOPA urges insurers and intermediaries to continue efforts to mitigate the impact of COVID-19 on consumers
On 1 April 2020, EIOPA issued a statement to insurers and intermediaries requesting them to take action to mitigate the impact of COVID-19 on consumers. Specifically, EIOPA has asked insurers and intermediaries to:
- provide clear and timely information to consumers on contractual rights
- treat consumer fairly and be explicit in communications
- keep consumers informed about contingency measures
- continue applying product oversight and governance requirements, and where necessary, carry out a product review
- exercise flexibility in the treatment of consumers where reasonable and practical
European Commission launches a consultation on a renewed sustainable finance action plan
On 8 April 2020, the European Commission published a consultation on a renewed sustainable action plan as part of the new EU Green Deal. The insurance industry is a key player in moving towards a more sustainable Europe. Key elements required to enable the insurance industry to contribute include:
- effective and efficient regulation so that insurers can mitigate risk and enhance investment potential
- the development of investment projects to allow long-term focused institutional investors to fund projects and provide reliable return to their customers
- the provision of sufficient and high-quality data to assess and mitigate risks. Submissions on the proposals are welcome until 15 July 2020
EIOPA issues update on measures impacted by COVID-19 pandemic
On 2 April 2020, EIOPA issued an update on measures impacted by COVID-19 and EIOPA responses. These responses include:
- extending consultation periods for currently open market consultations
- delaying public consultations in the process of BoS approval to the market
- the cancellation or delay of data requests from financial institutions
EIOPA urges (re)insurers to temporarily suspend all discretionary dividend distributions and share buy backs
On 2 April 2020, EIOPA issued a statement on dividends distribution and variable remuneration policies in the context of COVID-19. EIOPA recommends that (re)insurers temporarily suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders. This recommendation builds on EIOPA's advice of 17 March 2020 for (re)insurers to protect their capital position in balance with the protection of the insured. EIOPA advises that this suspension should be reviewed as the financial and economic impact of COVID-19 is clarified.
EIOPA publishes monthly technical information
On 3 April 2020, EIOPA published technical information on the symmetric adjustment of the equity capital charge and risk free interest rate term structures for Solvency II purposes with reference to the end of March 2020 in both cases.
EIOPA publishes second report on costs and past performance of insurance based investment products and personal pension products
On 6 April 2020, EIOPA published its second report on costs and past performance of insurance based investment products and personal pension products. The report analyses costs for 2018 and past performance for the period 2014-2018. The results indicate that:
- unit-linked products perform better than profit participation products
- performance of products in 2018 was the lowest for five years
- costs remain high and unit-linked products have higher costs than profit participation products
- ongoing costs are the biggest cost component
- higher risk products have higher net returns despite higher variability of net returns
EIOPA publishes opinion on the supervision of renumeration principles in the insurance and reinsurance sector
On 7 April 2020, EIOPA published an opinion on the supervision of remuneration principles in the (re)insurance sector. The opinion aims to enhance supervisory convergence by focusing on the remuneration principles identified in the Commission Delegated Regulation, with a particular focus on staff identified as potential "higher profile risk-takers". The opinion also provides guidance to national supervisory authorities in the application of such principles.
EIOPA publishes weekly extraordinary information
Since 27 March 2020, EIOPA has been publishing weekly technical information on the symmetric adjustment to equity risk and risk free interest rate term structures in order to assist (re)insurance undertakings in monitoring their solvency and financial position. The information is generally each Friday and can be found in a designated extraordinary weekly updates section on the EIOPA website.
Council of the EU publishes statement by EU finance ministers on bank lending and insurance
On 17 April 2020, the Council of the EU published a statement by EU finance ministers on continuing bank lending and maintaining a well-functioning insurance sector amid the COVID-19 crisis. The statement emphasises the support for EIOPA's recent statements and recommendations encouraging flexibility in the application of the Solvency II framework. The statement also encourages insurance companies to follow EIOPA's recommendations and to be proactive in preserving their capital position, including suspending discretionary distributions, and to continue to act in the best interest of consumers.
EIOPA publishes interview with chairman, Gabriel Bernardino
On 27 April 2020, EIOPA published an interview with its chairman, Gabriel Bernardino, which provides an update concerning the COVID-19 crisis. The update covers an overview of:
- the implications for the insurance sector
- EIOPA's response
- EIOPA's expectations from the insurance sector
- changes to the insurance sector
- how EIOPA has adapted to a new working environment
Eiopa revises timetable for advice on Solvency II review
On 30 April 2020, EIOPA announced that it was revising the timeline for delivery of advice to the impact assessment of the Solvency II review. In order to fully encapsulate the impact of the COVID-19 pandemic EIOPA will now submit its advice at the end of December 2020.
For more information on these topics please contact any member of A&L Goodbody's Insurance & Reinsurance team.
Date published: 11 May 2020