Financial Services Regulation and Compliance - Insurance June 2021
Insurance Corporations Statistics - Q1 2021
On 9 June 2021, the CBI published Q1 2021 statistics for Irish resident insurance corporations. The key statistics include the following:
- Total insurance corporation assets grew by €15.7bn to €396bn. €12bn of this increase is directly attributable to listed equity holdings and equity investment fund holdings.
- Out of the €6.3bn growth in listed equity holdings, €5bn relates to equities issued by non-financial corporations.
- Regarding liabilities, a €12bn increase of unit-linked insurance technical reserves was reported as being the largest contributor in total liabilities for the sector.
COVID-19 and Business Interruption Insurance – The CBI's expectations
On 11 June 2021, the CBI issued a letter to the insurance industry setting out its expectation that on conclusion of a legal action, where an insurance policy has been interpreted in a manner favourable to policyholders, insurers must carry out assessments regarding similarly placed policyholders and implement appropriate remedial actions. Furthermore, insurers are expected to assess whether a potential legal action could qualify as a test case as this is in the best interests of customers. The letter sets out a non-exhaustive list of factors to be taken into consideration by insurers in carrying out such assessments and states that these analyses must be made available to the CBI on request.
The CBI's Insurance Quarterly Newsletter – June 2021
On 16 June 2021, the CBI published its second Insurance Newsletter of 2021. The topics covered include underwriting risks, IT risks, intragroup exposures, recovery planning and sustainable finance updates. The CBI reminds firms of its expectations regarding cybersecurity risk management, as set out in its industry letter of 10 March 2020. Additionally, the European Insurance and Occupational Pensions Authority (EIOPA) guidelines on information and communication technology (ICT) security and governance come into effect on 1 July 2021 and the CBI fully endorses these guidelines and has integrated them within its supervisory framework. Looking forward, the CBI undertakes to set out its expectations for recovery plans in the next issue of the newsletter.
Intermediary Times – June 2021
On 18 June 2021, the CBI published the first issue of the Intermediary Times for 2021. Key amongst the updates in the publication is a report that a review of the Consumer Protection Code (the Code) is ongoing and a consultation paper will be published in autumn of this year. The review will result in the Code being transferred into regulations. Other key reports in the publication include updates on:
- commission arrangement guidance in the Code
- fitness and probity
- 2020 Industry Funding Levy
- business interruption insurance
- the Consumer Protection Outlook Report 2021
Supervisory Priorities in Uncertain Times - Domhnall Cullinan, Director of Insurance Supervision
On 23 June 2021, the CBI's Director of Insurance Supervision, Domhnall Cullinan, gave a speech to an insurance industry event on supervisory priorities. During his speech, Domhnall Cullinan:
- highlighted key challenges that, in his view, are faced by the insurance and reinsurance sectors
- discussed how these challenges have shaped supervisory priorities
- explained what the CBI expects of regulated firms and what they can expect from the CBI
Amongst other areas, Domhnall Cullinan spoke about effective supervision, COVID-19 impacts on supervision, strengthening regulatory frameworks and the future of insurance.
EIOPA updates documentation regarding risk-free interest rate term structures
On 1 June 2021, EIOPA issued updated technical documentation arising from a technical amendment in risk-free rate (RFR) technical documentation and data relating to Danish Krone corporate bond rates.
On 3 June 2021, EIOPA published updated representative portfolios relating to the calculation of the volatility adjustments to the relevant risk-free interest rate term structures for Solvency II in June 2021.
EIOPA publishes monthly technical information
On 3 June 2021, EIOPA published updated technical information on the symmetric adjustment of the equity capital charge for Solvency II, with reference to the end of May 2021.
On the same day, EIOPA published updated technical information on the relevant risk free interest rate term structures (RFR), with reference to the end of May 2021. The updated RFR source code is available on the RFR area on EIOPA's website.
EIOPA publishes report on artificial intelligence governance principles
On 17 June 2021, EIOPA published a report outlining the artificial intelligence (AI) governance principles for ethical and trustworthy AI practices in the European insurance industry.
The report is the output of a digital ethics consultative expert group following EIOPA's thematic review on the use of Big Data Analytics in motor and health insurance. The report highlights the growing use of AI in the insurance industry, including the potential benefits and risks associated with its use. The report also sets out the six governance principles that should be considered by insurers when utilising AI, which are as follows:
- fairness and non-discrimination
- transparency and explainability
- human oversight
- data governance of record keeping
- robustness and performance
The principles set out in the report are accompanied by additional guidance for insurance firms on how to implement them in practice. In announcing the report, EIOPA outlines that it plans to use the findings in identifying appropriate supervisory initiatives for the use of AI by the insurance industry, taking into account any developments related to digitalisation and AI at an EU level.
Letter to the European Commission on the amendment to background impact assessment of the 2020 review of Solvency II
On 11 June 2021, EIOPA wrote to the European Commission in respect of its Opinion on Solvency II.
The letter explains that projections relating to the introduction of the extrapolation method contained unsuitable data and as a result EIOPA revised the impact assessment. An updated assessment, excluding such unsuitable data, was enclosed with the letter.
EIOPA further states that overall the revision does not alter its 2019 and mid-2020 Opinion on Solvency II.
EIOPA Annual Report 2020
On 15 June 2021, EIOPA issued its Annual Report for 2020, summarising its activities over the past year. EIOPA highlighted a number of its key activities, including
- its approach to the COVID-19 pandemic, emphasising its actions on ensuring business continuity, stability of the insurance sector and mitigating impact on consumers,
- leading convergence towards high-quality prudential supervision,
- strengthening the financial stability of the insurance and occupational pensions sector and
- its continued work on the impact of climate change and the role of sustainable finance
For 2021 and beyond, EIOPA highlighted the important role insurers have to play in the economic recovery from the pandemic – particularly in the context of green and digital transitions and fostering a capital markets union. The report can be viewed in full on EIOPA's website.
For more information on these topics please contact any member of A&L Goodbody's Insurance & Reinsurance team.
Date published: 9 July 2021