Financial Services Regulation and Compliance - Insurance July 2020
CBI publishes guidance note on completing an application for authorisation as a retail intermediary
On 1 July 2020, the CBI published two new application forms (the 'A Form' and 'B Form') for authorisation as a Retail Intermediary. Applicants seeking authorisation will be required to complete either the A Form or B Form depending on the nature, scale and complexity of their proposed activities. The CBI has also published accompanying guidance notes on the completion of both forms.
European Commission public consultation - review of prudential rules (Solvency II Directive)
On 1 July 2020, the European Commission (EC) launched a public consultation as part of its review of the key elements of Solvency II. The consultation will enable the EC to obtain stakeholders’ views on the broad objectives and priorities of the review, including the role of insurers in the long-term financing of the economy, transparency, policyholder protection and lessons learnt from the COVID-19 outbreak. The consultation is open until 21 October 2020 and feedback is being sought from policyholders, consumer associations and financial stakeholders.
EIOPA publishes technical information
On 3 and 14 July 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 June and 14 July 2020 in both cases. It also updated the representative portfolios that will be used for calculation of the volatility adjustments to the relevant risk-free interest rate term structures for Solvency II.
On 17 July 2020, EIOPA also published the Ultimate Forward Rate for 2021.
EIOPA clarifies supervisory expectations on product oversight and governance requirements in the context of COVID-19
On 8 July 2020, EIOPA issued a statement clarifying its expectations of firms on product oversight and governance requirements in the context of COVID-19. EIOPA's expectations are that insurance product manufacturers should:
- identify products whose main features, risk coverage or guarantees have been materially impacted by COVID-19
- consider whether, in light of that impact, the product continues to offer value to customers
- take remedial measures where this could result in unfairness
EIOPA announces the new composition of its two stakeholder groups
On 8 July 2020, EIOPA announced the appointment of new members to its two stakeholder groups – the Insurance and Reinsurance Stakeholder Group and Occupational Pensions Stakeholder Group.
Ultra-low yields and COVID-19 crisis significantly affecting the European insurance sector
On 17 July 2020, EIOPA published a report on the impact of ultra-low yields on the insurance sector, including the first effects of the COVID-19 crisis. The report found that the ultra-low interest rate environment remains a key concern for the insurance market and constitutes one of the most important sources of systemic risk for insurers for the future. In addition to this, COVID-19 has severely affected macroeconomic and market conditions worldwide, increasing the likelihood of a “low for long” scenario with adverse implications for the insurance sector. The report found that as a result, insurers are significantly challenged in terms of asset allocations, profitability, solvency and business model adaptation. The report also confirmed EIOPA's previous position from April regarding prudence on all discretionary dividend distributions and share buy backs.
Supervisory statement on the Solvency II recognition of schemes based on reinsurance with regard to COVID-19 and credit insurance
On 21 July 2020, EIOPA published a supervisory statement on the Solvency II recognition of schemes based on reinsurance with regard to COVID-19 and credit insurance. EIOPA identified significant differences in the way that national schemes in the area of credit insurance are implemented through the Temporary Framework for state aid measures to support the economy in the current COVID-19 outbreak (the Temporary Framework). The Temporary Framework was adopted by the Commission on 19 March 2020 in response to the economic impact of the COVID-19 outbreak. To ensure a level playing field and consistent treatment of schemes with the same economic consequences as reinsurance, EIOPA made recommendations for national competent authorities, for example, allowing (re)insurers to consider schemes that transfer insurance risk to a Member State’s government based on the Temporary Framework as having the same consequences as reinsurance as defined in Solvency II.
EIOPA statement on Solvency II supervisory reporting in the context of COVID-19
On 27 July 2020, EIOPA announced that following its recommendations of 20 March 2020 on annual and quarterly reporting and publication deadlines, it now considers that insurance and reinsurance undertakings should be in a position to comply with the deadlines provided in the Solvency II framework.
Insurance against pandemic risk: EIOPA identifies options for shared resilience solutions
On 27 July 2020, EIOPA published an issues paper on shared resilience and solutions for pandemic risk in the future, recognising that private insurance solutions alone will not be sufficient to protect against the financial consequences of future pandemics. The paper noted that solutions for the future will require both public and private sector involvement, and build on four key elements:
- proper risk assessment
- risk prevention and adaptation measure
- appropriate product design
- risk transfer
Potential options include, for example, whether cover should be mandatory, and whether payouts should be based on a pre-agreed parameter or index, different ways the public and private sectors could work together.
For more information on these topics please contact any member of A&L Goodbody's Insurance & Reinsurance team..
Date published: 6 August 2020