Financial Services Regulation and Compliance - Insurance February 2024

Domestic

CBI publishes checklist for completing and submitting a change of business notification

The Central Bank of Ireland (the CBI) published a ‘checklist for completing and submitting a change of business notification’ (the checklist) on 29 February 2024. The document lists the information required by the CBI to consider/approve (re)insurance undertakings proposals for material changes to their business. Key requirements/areas of focus in the checklist include:

  • a detailed “scheme of operations”
  • information on the entity’s system of governance
  • risk oversight information (including an updated ORSA)
  • three years of financial projections.

The CBI also emphasises the need for early engagement, noting that (re)insurers should contact their supervision team to discuss proposals for a change business before submitting the checklist to the CBI.

European

New EIOPA research probes reasons behind consumers’ reluctance to taking out natural catastrophe insurance

On 29 February, EIOPA issued a revised staff paper on demand-side factors influencing low uptake of natural catastrophe (NatCat) insurance across Europe (the paper). This follows previous papers and statements issued by the European Insurance and Occupational Pensions Authority (EIOPA) on the NatCat insurance protection gap in 2023 (See ALG’s article on NatCat protection gap issues here). 

The paper examines the reasons underpinning the lack of NatCat cover, noting that only approx. 25% of related losses are covered in Europe at present. Key factors explaining lack of adequate NatCat cover include:

  • perceived unaffordability of NatCat products
  • unclear product terms and conditions
  • negative experiences of insurance claims

EIOPA proposes several solutions to improve NatCat coverage which include:

  • underlining the risk posed to consumers due to lack of cover
  • product standardisation
  • improved customer journey processes
  • incentivising risk-mitigation measures

EIOPA appoints Steven Vanackere to Management Board

Steven Vanackere, Vice Governor of the National Bank of Belgium, was appointed to the Management Board of EIOPA on 13 February 2024. He will begin his two-and-a-half-year position after taking over from Ms Else Bos.

EIOPA publishes February 2024 Insurance Risk Dashboard

EIOPA published its Insurance Risk Dashboard based on Solvency II data for Q3 2023 on 5 February 2024. The dashboard aims to illustrate the primary risks and vulnerabilities to the insurance sector by compiling data from insurance groups and solo insurance undertakings within the EU. The dashboard grades the identified risks according to EIOPA’s assessment (very high, high, medium and low).

Key findings from the dashboard include that insurance risks remain at medium level with positive median year-on-year premium growth reported for both life and non-life business and a further deterioration seen for the loss ratio.

While EIOPA noted that cyber and digitalisation risks decreased, they do flag, based on assessments by national regulators, that this risk will likely increase to above its current median level. This is against the backdrop that while the rate of cyber incidents slightly decreased in Q4 2023, this rate remained elevated.

EIOPA publishes monthly technical information for Solvency II

EIOPA published its monthly technical information on 5 February 2024 regarding the relevant risk-free interest rate term structures (RFR) with reference to the end of January 2024, 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 January 2024.

EIOPA publishes shocked risk-free interest rate term structures

On 19 February, EIOPA, for the first time published shocked risk-free interest rate term structures (SHOCKED RFR). The SHOCKED RFRs may be used to calculate the “option-adjusted” duration of technical provisions to be reported for financial stability purposes. The technical documentation comparing the SHOCKED RFRs, provides an overview of the changes and focuses on the assessment of the financial instruments used for constructing the SHOCKED RFRs. EIOPA also noted that while the reporting of the “option-adjusted” duration is optional, undertakings should consider the need to report on this metric in discussions with their national supervisors. The next update will be published in July 2024.

Commission Implementing Regulation (EU) 2024/456 of 7 February 2024: European Commission sets technical information for the calculation of technical provisions and basic own funds for reporting by insurance and reinsurance undertakings

The European Commission has adopted Regulation (EU) 2024/456 (the Regulation), which lays down the technical information for the calculation of technical provisions and basic own funds for reporting. In accordance with Solvency II, (re)insurance undertakings are required to:

  • establish adequate technical provisions to meet their commitments towards policyholders and beneficiaries
  • ensure that they hold eligible basic own funds to cover the minimum capital requirement.

The Regulation aims to guarantee that (re)insurance undertakings are provided with the same uniform conditions when calculating their respective technical provisions and minimum capital requirements by requiring them to use the same up-to-date technical information published by EIOPA. The Regulation entered into force on 8 February 2024 but will apply retroactively with reference dates from 31 December 2023 to 30 March 2024.

EIOPA seeks new members to join its Insurance and Reinsurance Stakeholder Group

On 26 February 2024, EIOPA launched a call for expression of interest in selecting new members of its Insurance and Reinsurance Stakeholder Group (IRSG). The IRSG is composed of 30 members and is tasked with facilitating engagement between EIOPA European stakeholders on issues such as technical standards, guidelines, and recommendations that apply to the insurance sector. EIOPA is due to conclude the selection process at the end of June 2024 and the inaugural meeting of the IRSG will take place in September 2024.

For more information on these topics please contact any member of A&L Goodbody's Insurance & Reinsurance team.

Date published: 21 March 2024