Financial Services Regulation and Compliance - Insurance June 2023
Financial Services Regulation and Compliance - Insurance June 2023
Central Bank of Ireland publishes the Insurance Quarterly Newsletter for Q2 2023 (see here)
The Central Bank of Ireland (the CBI) published its Insurance Quarterly Newsletter (the newsletter) on 27 June 2023. The newsletter addresses several important topics. These include:
Outputs from the thematic inspection of product oversight and governance (POG) and the identification of a number of good practices that undertakings should embed in their business.
Increased supervision of reinsurance activities, with a particular focus on non-traditional risk mitigation techniques that have emerged in the market.
Digitalisation in insurance and the report arising from the CBI’s digitalisation survey.
An update on financial sanctions in light of the ongoing war in Ukraine, reminding firms of their diligence and reporting obligations.
Conduct risks in the insurance sector, with a particular focus on consumer risks.
The newsletter also features important industry updates regarding sustainable insurance at a European level. This includes a valuable synopsis of the European Supervisory Authorities’ (the ESAs) proposal for ESG disclosures for simple, transparent and standardised securitisations.
Consumer Insurance Contracts (Amendment) Bill 2023 (see here)
On 1 June 2023, Senator Barry Ward introduced the Consumer Insurance Contracts (Amendment) Bill 2023 (the 2023 Bill). The 2023 Bill is designed to amend the Consumer Insurance Contracts Act 2019 by banning the use of "clauses of average" by insurance providers in relation to non-life insurance contracts. If the 2023 Bill is enacted, Irish insurers will be prohibited from relying on any clause in a contract of non-life insurance that seeks to limit the total amount payable to the insured on the basis that the value of the insurance claim exceeds the value of the insured property. Having passed the first stage, the 2023 Bill is now before Seanad Éireann for debate at second stage.
Insurance corporation statistics - Q1 2023 (see here)
On 9 June 2023, the CBI released its insurance corporation statistics for Q1 2023. Among the highlights are statistical indications that the trend of assets falling in the insurance sector has reversed. Significantly, growth of 5% was experienced by the insurance sector during Q1 2023, bringing the total value of assets to €405bn. The statistics also note that the technical reserve liabilities have risen in the sector with non-life insurance technical reserves (ITRs) and unit linked life ITRs increasing by €5bn and €9bn, respectively.
The statistics also evidenced that 84% of Irish insurers’ investment fund holdings comprise of equity, bond and mixed fund shares.
Remarks by Director of Financial Regulation, Policy and Risk, Gerry Cross, on insurance, regulation and the transition to a net zero economy (see here)
In an address to Insurance Ireland on 22 June 2023, CBI Director of Financial Regulation, Gerry Cross, discussed the challenges and opportunities for insurers in relation to protection gaps, sustainable finance and greenwashing and stressed the need for a co-ordinated approach to increasing coverage for natural disasters. Mr Cross stressed the need for insurers to be prepared for the implementation of new EU legislation, including the Sustainable Finance Disclosures Regulation and the Corporate Sustainability Reporting Directive and to consider the impact of climate change risk on all aspect of their business.
On 14 June 2023, EIOPA published its Annual Report (the report). The report sets out EIOPA's main accomplishments and activities in 2022. EIOPA underlined the impact of geopolitical conflict (e.g., the war in Ukraine) and rising inflation on its work and noted developments in the following areas over the year, which remain its key priorities:
transitioning to a more sustainable economy
The report also notes EIOPA's revised strategy for 2023-2026, which seeks to foster resilience and sustainability in the wider insurance and pensions sector on a continued basis.
EIOPA publishes progress Report on Greenwashing (see here)
On 1 June 2023, EIOPA published its progress report on greenwashing (the report) from an insurance and pension perspective. Greenwashing is the practice of making sustainability-related disclosures in relation to a financial services product that do not accurately reflect the sustainability profile of the product. The report outlines how greenwashing occurs, its impact, challenges related to its supervision and its implications for the regulatory framework. EIOPA also noted that national competent authorities have started to integrate greenwashing considerations into their supervisory activities. EIOPA plans to propose improvements to the regulatory framework in its final report which will be published in May 2024. The Report can be viewed in full on EIOPA’s website.
EIOPA publishes June 2023 Financial Stability Report (see here)
EIOPA has published its Financial Stability Report for June 2023 (the report), which provides an overview of the financial stability and key risks posed to the resilience of the insurance and pensions sector over the preceding 12 months. EIOPA notes that the insurance sector remains resilient, despite increased uncertainty and heightened financial stability risk. The report touches on an array of topics including risks arising through digitalisation, insurer capitalisation and underwriting profitability, and the impact of inflation on the insurance sector. The report can be viewed in full on EIOPA’s website.
EIOPA publishes technical information update
On 5 June 2023, EIOPA published its monthly technical information on the relevant risk-free interest rate term structures with reference to the end of May 2023. This technical information is used for the calculation of technical provisions for (re)insurance obligations. EIOPA published technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of May 2023.
EIOPA to undertake the first joint mystery shopping exercise across several EU Member States (see here)
EIOPA announced on 28 June 2023 that it intends to conduct a mystery shopping exercise on the sale of insurance products and services in eight EU Member States. This is the first such project carried out by EIOPA and will involve trained 'mystery shoppers' posing as customers. The mystery shoppers will assess the consumer experience and learn about how insurers and insurance distributors sell products and services. EIOPA intends to publish the results of the project in early 2024.
EIOPA publishes blog post on using comparative studies as a supervisory tool (see here)
On 29 June 2023, EIOPA published a blog post on its use of comparative studies as a supervisory tool. The blog post provides an overview of how EIOPA compares and contrasts the use of internal model relied upon by insurers to assess risk exposures and allocate sufficient capital to meet their Solvency II obligations. EIOPA notes that it is currently carrying out comparative studies on the following aspects of the internal model: