Financial Services Regulation and Compliance - Insurance April 2023
Domestic:
Central Bank of Ireland publishes Private Motor Insurance Mid-Year Report of the National Claims Information Database (see here);
The Central Bank of Ireland (the CBI) published its first mid-year Private Motor Insurance Report of the National Claims Information Database (NCID) (the report) on 25 April 2023, capturing data up to 30 June 2022. The report seeks to provide up to date information on premium amounts, settled claim amounts and analysis on the impact of the Personal Injury Guidelines 2021 (the guidelines) on average claim costs. Among the key findings were:
- The average earned premium per policy decreased 5% against 2021 figures, to €578.
- Cost of damage claims increased in 2022, while the number and cost of injury claims decreased.
- 43% of all injury claims settled under the Personal Injury Guidelines in the first half of 2022.
- Not enough litigated claims have been settled under the guidelines to determine their impact on the average cost of litigation claims, which is important as 79% of settled injury claim costs in H1 2022 related to litigation.
Address by Director of Insurance Supervision, Domhnall Cullinan, to the Insurance Ireland-Milliman CRO Forum (see here);
On 18 April 2023, CBI Director of Insurance Supervision, Domhnall Cullinan, addressed the Insurance Ireland-Milliman Chief Risk Officer Forum. Mr. Cullinan's speech briefly touched on recent turmoil in the banking sector due to the collapse of SVB and Signature Bank, and UBS' acquisition of Credit Suisse. Though direct exposure to Irish (re)insurers arising from this was low, Mr. Cullinan recommended that they monitor market and credit risks in their investment portfolios in light of enhanced volatility, and reminded them to adhere to the prudent person principle when investing.
Mr. Cullinan also outlined the CBI's insurance supervisory priorities for 2023, as being:
- implementation of the Individual Accountability Framework
- financial resilience
- monitoring of consumer interests, specifically payment protection insurance (PPI) and value for money (VfM) in unit linked products
- climate change
- digitalisation and technology
- operational resilience including Digital Operational Resilience Act (DORA)
- compliance with financial sanctions
The General Good Rules - arising from the Directive (EU) 2016/97 on Insurance Distribution were updated on 17 April 2023:
The CBI updated the General Good Rules arising from the Directive (EU) 2016/97 on Insurance Distribution (the rules) on 17 April 2023. Insurance and reinsurance distributors operating in Ireland on a cross-border basis are required to adhere to the rules and the responsibility rests with such distributors to be aware of the provisions that apply to them and any relevant updates. The rules have been updated to include references to the Consumer Insurance Contracts Act 2019, amendments to the Consumer Protections Code and registration requirements relating to pension schemes and health insurance.
We would encourage insurance and reinsurance distributors to familiarise themselves with the updates.
European:
EIOPA’s year-end 2021 study on market and credit risk modelling (see here)
EIOPA published its comparative study on market and credit risk modelling under Solvency II for year-end 2021. EIOPA conducts this study, to monitor the modelling of market and credit risks, on an annual basis. EIOPA reiterated that market and credit risk contribute to the solvency capital requirements of insurance undertakings. EIOPA highlighted the need for continuous national and EU-level supervisory scrutiny and confirmed its intention to further develop appropriate supervisory tools and develop consistent supervisory approaches in this space.
Report on EIOPA supervisory activities in 2022 (see here)
EIOPA published its annual report summarising its supervisory activities for the year 2022 on 3 April 2023 (the report). Overall, EIOPA commented on its contribution to the enhancement of the common European supervisory culture and promoted consistent prudential and conduct of business supervisory practices during 2022. EIOPA also provided a summary of the key consultations and supervisory statements issued, along with the key deliverables achieved, during 2022.
EIOPA publishes technical information update
EIOPA published its monthly technical information on 5 April 2023 regarding the relevant risk free interest rate term structures with reference to the end of March and updated the representative portfolios to calculate volatility adjustments. This technical information is used for the calculation of technical provisions for (re)insurance obligations. It also published technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of March 2023.
EIOPA's planned public consultations for 2023 (see here):
On 31 March 2023, EIOPA published a list of planned public consultations for 2023 to provide stakeholders with an insight into EIOPA's areas of focus. The list of topics include:
- review of SFDR Delegated Regulation (PAI Indicators) (planned publication - April 2023)
- opinion on captive insurance undertaking supervision (planned publication - July 2023)
- open insurance use case for consultation (planned publication - July 2023)
- supervisory statement on best practices on supervision of reinsurance with third country reinsurers (planned publication - July 2023)
- prudential treatment of sustainability risks (planned publication - July 2023)
EIOPA and ECB call for increased uptake of climate catastrophe insurance (see here);
EIOPA and the European Central Bank (ECB) published a joint discussion paper setting out the policy options to reduce the climate insurance protection gap. The discussion paper notes that, at present, only around 25% of the losses caused by extreme weather and climate-related events in the EU are currently insured, with less than 5% of such losses insured in several countries. One of the main concerns about the protection gap is the effect it can have on economies and financial stability (e.g. where businesses and supply chains are interrupted or where governments have to provide relief to uninsured loss sufferers). The discussion paper sets out a number of suggested actions to reduce the protection gap.
EIOPA and the ECB are seeking comments and feedback on the discussion paper by 15 June 2023 and will be holding a workshop with regulators
For more information on these topics please contact any member of A&L Goodbody's Insurance & Reinsurance team.
Date published: 15 May 2023