Financial Services Regulation and Compliance - Insurance Feb 2020
Central Bank of Ireland (Central Bank) proposes new Pre-Approval Control Functions roles
On 25 February 2020, the Central Bank published a Notice of Intention proposing new Pre-Approval Control Functions (PCFs). Of particular interest for the insurance industry is the new PCF of Chief Information Officer (PCF-49). The CBI is of the view that due to the advancement of information technology and its impact on the way business is conducted in the financial services industry, it is appropriate to introduce this new PCF role. Stakeholders are invited to comment on the proposed new PCF roles by 26 March 2020.
OJ publishes Commission implementing Regulation on the calculation of technical provisions and basic own funds in Q1 2020
On 13 February 2020, the Official Journal of the EU (OJ) published Commission Implementing Regulation (EU) 2020/193 (CIR 2020/193) which sets out technical information for the calculation of technical provisions and basic own funds for reporting, with reference dates from 31 December 2019 until 30 March 2020, in accordance with the Solvency II Directive (2009/138/EU).
CIR 2020/193 came into force on 14 February 2020 and applies from 31 December 2029.
European Systemic Risk Board (ESRB) publishes report on macro-prudential policy for the insurance sector
On 26 February 2020, the ESRB published a report on macro-prudential policy for the insurance sector. The ESRB believes that the 2020 Solvency II review, will result in a revised framework better reflecting macro-prudential considerations reducing systemic risk in the financial sector. To reduce systemic risk, the report identifies tools competent authorities should use, including (amongst other matters):
(a) solvency tools for preventing and mitigating pro-cyclical investment behaviours of insurers and
(b) liquidity tools for addressing risks stemming from specific activities, such as hedging with derivatives and selling insurance products with redemption features.
Supervisory Statement on ultra-low/negative interest rate environment
On 19 February 2020, EIOPA published a Supervisory Statement (addressed to supervisory authorities and the insurance industry) on the impact of the ultra-low/negative interest rate environment. EIOPA noted that the interest rate environment was having an impact on the EU insurance sector particularly in relation to asset allocation, reinvestment risk, profitability and solvency. The Supervisory Statement contains a number of short term recommendations including (among other matters):
(a) the monitoring and supervision of insurers identified as facing greater exposure to the low interest rate environment and
(b) focusing special attention on pre-emptive recovery and resolution planning.
EIOPA Consumer Trends Report 2019
On 13 February 2020, EIOPA published its Consumer Trends report for 2019. Key findings include (among other matters):
a) the continued digitalisation of the insurance industry
b) improvements in transparency and disclosure of information to consumers; and
c) unit-linked insurance, credit life/credit protection and insurance sold in connection with the purchase of other goods and services remain areas of concern.
EIOPA sets out strategies on cyber underwriting and supervisory technology
On 11 February 2020, EIOPA published its strategies for cyber underwriting and supervisory technology. Due to the increase in frequency of cyberattacks, EIOPA has identified the need for a sound cyber insurance market. EIOPA has indicated that it will work with national competent authorities to create innovative and efficient supervisory solutions. To do this EIOPA has developed a number of actions including (among other matters) periodically assessing cyber underwriting and risk management.
EIOPA publishes monthly technical information
On 6 February 2020, EIOPA announced its intention to launch an EU-wide thematic review of consumer protection issues with mortgage life and other credit protection insurance sold through banks. EIOPA stated that while credit protection insurance, when adequately developed, can be of benefit to consumers there are risks and issues relating to this type of insurance. As part of this thematic review, EIOPA hosted a roundtable discussion on 5 March 2020 with external stakeholders seeking input on, amongst other items:
(i) issues and risks with the insurance products within scope of this review
(ii) business models used to manufacture and distribute these products
(iii) potential benefits for consumers, insurers and banks and
(iv) market practices that could lead to consumer detriment.
EIOPA publishes consultation paper on technical implementation means for the package on Solvency II Supervisory Reporting and Public Disclosure
On 5 February 2020, EIOPA published a consultation paper on the technical implementation means for the package on Solvency II Supervisory Reporting and Public Disclosure. EIOPA confirmed that it aims to improve the efficiency and effectiveness of the reporting and disclosure framework. On that basis, EIOPA has decided to integrate into the wider 2020 Solvency II review a review of the technical implementation means to ensure that the entire reporting process is considered. Responses on the consultation paper are sought until 20 April 2020.
Guidelines on outsourcing to cloud service providers now available for national supervisory authorities
On 5 February 2020, EIOPA issued guidelines on outsourcing to cloud service providers for national supervisory authorities. In developing these guidelines EIOPA considered feedback from a public consultation and also considered the most recent guidance published by the European Banking Authority.
The guidelines cover a number of areas including:
(a) criteria to distinguish whether cloud services should be considered within the scope of outsourcing
(b) contractual requirements and
(c) management of access and audit rights.
For more information on this topic please contact any member of A&L Goodbody's Financial Regulation team.
Date published: 6 March 2020