The Central Bank of Ireland (the CBI) released its Insurance Corporation Statistics for Q3 2023 on 1 December 2023. Key points to note include:
A decrease of 2.3% in the total assets of the Irish insurance corporation sector was recorded, partially reversing the increase seen in the first half of 2023. Despite this decrease, total assets of the IC sector remained 5.6% higher than total assets recorded at Q4 2022.
Technical reserves (TRs) decreased slightly in Q3 2023, with a decline of 5.5% in non-unit linked life insurance TRs, while non-life insurance TRs remained stable.
Since Q4 2021, non-unit linked life insurance TRs remain down by 21% while unit-linked life TRs are down 6%. In contrast, non-life insurance TRs have increased 30% over the same period.
CBI publishes December edition of the Insurance Newsletter
In December, the CBI published its latest insurance newsletter which addresses a number of topics of importance to insurers:
Risk Environment (such as developments in the size and structure of the Irish insurance sector and an uncertain external environment) and Supervisory Priorities (including adequacy of governance arrangements for the third part of 2024).
Clarity on its approach to reviewing (re)insurer change in business plans – the CBI will continue to focus on the notification of a change in business plan in 2024. The CBI intends to publish a ‘checklist’ of specific information required in the assessment of a material change in business plan and engage with the industry on its approach to reviewing these notifications.
The CBI’s recent engagement with stakeholders including a briefing on the ongoing Solvency II review; presentations on ‘risk management – insights from financial services firms’; and speeches on “maintaining stability in the face of volatility – financial regulation in a rapidly changing world”.
Expectations in relation to the performance of a materiality assessment for climate change risks – this is a follow on from the CBI’s guidance for (Re)Insurance Undertakings on Climate Change Risk published in March 2023.
Updates on the CP156 Innovation engagement – referring to the proposed enhancements contained within the Consultation Paper Central Bank approach to innovation engagement in financial services, including enhancing the CBI’s innovation hub and the innovation sandbox programme.
Further commencement of the Road Traffic and Roads Act 2023
On the 30 November, Minister Eamon Ryan issued a commencement order on section 5(1) of the Road Traffic and Roads Act 2023.
This provision requires that a fleet owner or motor trader must supply the Motor Insurers’ Bureau of Ireland (MIBI) with their vehicle registration number, or their vehicle identification number or any other unique identifying number given by the manufacturer, if available. Additional information is also required to be disclosed to MIBI including the policyholder date of birth and relevant driving licence details.
CBI publishes fifth annual Private Motor Insurance Report of the National Claims Information Database
The CBI published the fifth annual Private Motor Insurance Report of the National Claims Information Database (the Report) on 13 December 2023.
Key findings of the Report include:
total earned premium for private motor insurance in Ireland across 2022 was €1.3bn
in relation to the cost of insurance, the average premium cost per policy decreased by 7% to €568 from 2021 to 2022 and the average cost of a damage claim increased by 20% in 2022, likely due to the higher inflationary environment
for the period 2015 to 2022, there has been a 48% increase in the average cost of a damage claim, with a 32% increase identified between 2021 and 2022
damage claims now represent 46% of settled claims costs
claims settled through litigation remain the largest portion of costs of injury claims settled in 2022
Financial Services and Pensions Ombudsman (Amendment) Bill 2023
The text of the Financial Services and Pensions Ombudsman (Amendment) Bill 2023 (the Bill) was approved by Government on 13 December 2023 and initiated in the Dáil on 19 December 2023.
The Bill safeguards access to the Financial Services and Pensions Ombudsman (FSPO) for customers of financial service providers who have left the Irish market. Additional changes are made to the procedure of FSPO investigations and hearings including a power for the FSPO to summon any person to attend and give evidence under oath or affirmation.
EIOPA publishes monthly technical information – end-November 2023
The European Insurance and Occupation Pension Authority (EIOPA) published its monthly technical information on 5 December 2023 regarding the relevant risk-free interest rate term structures with reference to the end of November 2023, for Solvency II purposes. This technical information is used for the calculation of technical provisions for (re)insurance obligations. On the same date, EIOPA also published technical information on the symmetric adjustment of the equity capital charge under Solvency II with reference to the end of November 2023.
EIOPA updates representative portfolios to calculate volatility adjustments to the Solvency II risk-free interest rate term structures - December 2023
On 6 December, EIOPA announced that it will publish updated representative portfolios. These updated representative portfolios will be used for the calculation of the volatility adjustments to the relevant risk-free interest rate term structures as part of the Solvency II.
Volatility adjustments are used for the appropriate treatment of insurance products under Solvency II, where certain products may have long-term guarantees. Based on end-of-2022 annual reporting templates submitted to relevant national supervisory authorities, EIOPA state that the portfolios allow for greater accuracy in the determination of the impact of market volatility under Solvency II.
These updated representative portfolios will apply from March 2024, and are expected to be published by EIOPA at the beginning of April 2024.
EIOPA publishes Financial Stability Report December 2023
On 11 December 2023, EIOPA published its Financial Stability Report December 2023 (the report). The report analyses key risks and developments in Europe for the insurance and occupational pension sectors. It identifies four key areas of focus, including:
developments in the liquidity position of the insurance sector
asset allocation by insurers in an environment of rising interest rates
liquidity needs of the occupational pension sector in relation to interest rate derivatives
the impact on insurers of past recessions and lessons learned
EIOPA launches a number of consultations
In December, EIOPA launched three public consultations, including:
A consultation on its draft opinion on sustainability claims and greenwashing. EIOPA’s draft opinion sets out several primary principles which providers must comply with when making sustainability claims. Additionally, in order to demonstrate how greenwashing can occur in practice, EIOPA has provided examples of good and bad practices for each of the principles. The consultation period runs from 12 December 2023 with stakeholders invited to submit their comments in advance of 13 March 2024.
A consultation on the prudential treatment of sustainability risks running from 13 December 2023 to 22 March 2024.
A consultation on the methodology for setting value-for-money benchmarks for unit-linked and hybrid insurance products. This consultation is in response to EIOPAs observance of supervisory issues linked to the complexity of the products, and discrepancy between consumer expectations and product returns. Within the consultation paper, EIOPA set out a three-step approach creating such benchmarks. This consultation will close on 15 March 2024.
European Council and Parliament reach provisional agreement on amendments to the Solvency II Directive and new rules on insurance recovery and resolution
On 14 December a provisional agreement was reached between the European Parliament and Council on amendments to the Solvency II Directive and new rules on the Insurance Recovery and Resolution Directive.
The proposed amendments are intended to further incentivise long-term investments in line with the European Green Deal, to make long-term guarantees more risk sensitive with simplified rules to reduce the administrative burden and ensure greater consumer protection.
The agreed text has yet to be finalised but, once available, will be sent for approval to the European Parliament.
EIOPA launches catastrophe data hub to improve sustainability risk assessment
On 14 December, EIOPA launched a catastrophe data hub. The purpose of this hub is to provide an open-source collection of catastrophe risk data at European level and provides data on insured losses for three different events, including the 2017 wildfire in Portugal; the June 2013 floods and the 2020 windstorm Ciara. The hub is aimed for use by supervisors, the wider insurance sector, and policy and decision-makers.
EIOPA publishes keynote speech delivered at the EIOPA Sustainable Finance Conference 2023
On 14 December 2023, EIOPA Chairperson, Petra Hielkema, addressed the attendees at the 2023 EIOPA Sustainable Finance Conference. Some of the key themes addressed by Ms Hielkema in her speech included:
expected amendments to the Solvency II Directive and the introduction of the Corporate Sustainability Due Diligence Directive
tackling insurance protection gaps for natural catastrophes and the sharing of knowledge and data on catastrophe risks
the management of sustainability risks by insurers
the importance of addressing greenwashing in sustainability claims as a means of securing progress in the green transition
EIOPA analyses the costs and performance of retail investment products in insurance and pensions
On 18 December, EIOPA published its Costs and Past Performance Report December 2023.
Having analysed more than one thousand investment products from 173 insurers, over 200 personal pension products and 1400 occupational pension funds, the report notes that the high inflationary environment and rising interest rates effected market returns.
In considering the costs of the products in 2022 and the returns they offered, EIOPA states that unit-linked and hybrid products yielded negative returns. However, profit participation products showed positive nominal returns of 1.35%, but their real-term balance, accounting for inflation and costs, remained negative at -7.2%.
The cost of insurance-based investment products was high on average and there was increased growth for sustainable products as demand increased. Of note, the report states these sustainable products are often cheaper than non-sustainable products, with little difference in terms of their market performance.