Financial Services Regulation and Compliance - Insurance Mar 2021
DOMESTIC
CBI publishes insurance quarterly newsletter
On 16 March 2021, the Central Bank of Ireland (the CBI) published its first quarterly newsletter of the year. The newsletter contains updates from the CBI, European Insurance and Occupational Pensions Authority (EIOPA), and other sources with an insurance focus. In this issue, the CBI touched on recent developments related to business interruption and highlighted its Consultation on Draft Cross-Industry Guidance on Outsourcing, open until July 2021. The CBI also noted the European Commission's EU Strategy on Adaption to Climate Change, and the Sustainable Insurance Forum's Work Programme 2021-2023.
Government launches public consultation on enhancing and reforming the Personal Injuries Assessment Board (PIAB)
On 22 March 2021, the Government launched a consultation seeking feedback from stakeholders and the public on the role of the Personal Injuries Assessment Board (PIAB) and the operation of the PIAB Acts 2003-2019. The consultation forms part of the Government's Action Plan for Insurance Reform. The consultation notes that in recent years the number of cases finalised through PIAB has fallen. In contrast to the lower costs of PIAB claims, litigation costs are high and this has caused the rise in insurance costs. The proposed PIAB reforms will see more cases brought within PIAB's ambit, with the aim of reducing insurance costs. The consultation runs until 17 April 2021.
Health Insurance (International Students) (Amendment) Bill brought before Seanad
A Private Member's Bill proposing a new definition of "health insurance contract" under section 2 of the Health Insurance Act 1994 (as amended) has been brought before the Seanad. The proposal would create a separate class of insurance contract for international students who are not ordinarily resident in Ireland, and exclude these contracts from the meaning of "health insurance contract". The proposed amendment defines an "international student" as a person who is in Ireland to study for a period of 90 days or less, is on a Stamp 2/2A/1G visa, or is a non-EEA national who may or may not have to register with the Irish Naturalisation and Immigration Service.
EUROPEAN
EIOPA publishes monthly technical information
On 3 March 2021, EIOPA published technical information relating to the risk-free interest rate term structures and the symmetric adjustment for the equity capital charge for Solvency II purposes with reference in both cases to the end of February.
EIOPA advises on insurers' key performance indicators on sustainability for non-financial reporting
On 1 March 2021, EIOPA announced that it submitted its advice to the European Commission on mandatory sustainability disclosures of (re)insurers' key performance indicators (KPIs) within the scope of the Non-Financial Reporting Directive. EIOPA noted that the ratios required to be depicted by non-financial undertakings under Art. 8 of the Taxonomy Regulation should be translated for (re)insurance activities. EIOPA advised that (re)insurers should mandatorily report the following ratios:
- proportion of total assets invested in taxonomy-compliant economic activities
- proportion of total non-life insurance underwriting exposure associated with taxonomy activities
- proportion of total reinsurance underwriting exposure associated with taxonomy activities
EIOPA launches comparative study of non-life underwriting risk in internal models
On 1 March 2021, EIOPA launched a comparative study on non-life underwriting risk in internal models. The study covers internal model results from the commencement of Solvency II in 2016 to 2021 and looks to provide a European perspective for risk profile developments over that period. The ultimate aim is for the findings of the survey to provide a technically sound point of reference for undertakings to report their view on risk. Data will be collected for this phase of the survey until 15 September 2021.
EIOPA'S insurance and reinsurance stakeholder group advises on methodology on the potential inclusion of climate change in the Nat Cat standard formula
The Insurance and Reinsurance Stakeholder Group (IRSG), a group of 30 insurance industry stakeholders established by EIOPA, has issued advice on methodology for the potential inclusion of climate change risks in the natural catastrophe (Nat Cat) standard formula. The IRSG recommends clearer definitions of "perils" to ensure all risks are captured and the mapping of specific perils to terms to avoid confusion. The IRSG also supports the regular assessment of the Nat Cat parameters (e.g. every three to five years) so that the formula remains up to date. Finally, the IRSG advised that due to the uncertain outcomes of climate change events for the insurance industry, parameters that lower transparency should not be used in the Nat Cat formula and that EIOPA should take adaptation and prevention measures into account when assessing weather-related risks.
IRSG advises on non-life underwriting in light of climate change
EIOPA has published the IRSG's views on non-life underwriting with reference to climate change, submitted in response to EIOPA's discussion paper on the subject in December 2020. The IRSG agrees that climate change could lead to premium increases and wider exclusions from insurance cover. A key concern is that risks which are currently random become systemic, meaning they would be too expensive to insure. The IRSG noted that it is only through prevention and adaptation that these risks will remain insurable for a reasonable price. The IRSG also supports public-private partnerships to maintain availability and affordability of insurance for climate change related risks.
EIOPA announces exchange of letters on co-operation for insurance supervision with Japan's financial services agency
On 2 March 2021, EIOPA announced that it exchanged letters of cooperation concerning insurance regulation and supervision with Japan's Financial Services Authority (JFSA). The letters note the mutual benefit of engaging in such cooperation and the associated benefit of furthering the development and implementation of a risk-based insurance supervisory framework in Japan and the EU. The letters also note EIOPA and the JFSA's desire to continue to support each other in their activities and engage in dialogue to identify areas of cooperation, share information on regulatory developments of mutual interest and continue the development of international standards in insurance regulation.
IRSG advises on consultation on the ORSA supervisory statement in the context of COVID-19
On 15 March 2021, the IRSG responded to EIOPA's consultation on the Own Risk and Solvency Assessment (ORSA) supervisory statement in the context of COVID-19. The IRSG noted, among other matters, that Solvency II has proved its efficiency, relevance and adequacy during COVID-19 and that as ORSA expectations are already comprehensive in nature, they do not need to be extended due to COVID-19. However, the IRSG further noted that ORSAs produced by (re)insurance undertakings should be monitored in a proportionate manner to ensure they continue to meet expectations under Solvency II.
EIOPA publishes Q&As on the Insurance Distribution Directive
On 23 March 2021, EIOPA provided responses to a series of questions on the legal interpretation of provisions of the Insurance Distribution Directive (IDD). Broadly speaking, the Q&As consider issues regarding insurance product appropriateness, product oversight and governance and retrospective application of the IDD. In addition, one Q&A in respect of an Irish authorised entity confirms that the IDD fully applies to captive (re)insurance undertakings and in the same way as it applies to other (re)insurance undertakings.
EIOPA consults on revised guidelines on the use of the legal entity identifier
On 26 March 2021, EIOPA launched a consultation looking for comments from stakeholders on revised guidelines on the use of the legal entity identifier (LEI). Through the consultation, EIOPA aims to clarify the scope of entities requiring a LEI and assess whether to extend use of a LEI to insurance intermediaries and branches. The consultation also examines the use of the LEI code in respect of reporting by competent authorities to EIOPA. The consultation runs until 30 June 2021.
EIOPA brings about changes with regard to national general good requirements under the IDD
On 29 March 2021, EIOPA published details of a recent exchange with national competent authorities (NCAs) on their general good rules for registration and professional/organisational requirements for compliance with the IDD. EIOPA noted that in certain cases NCAs imposed additional requirements on passporting insurance distributors, which under IDD are the responsibility of the home Member State competent authority only. Where necessary, EIOPA requested the NCA remove the particular rule or requirement from its general good rules documents. The CBI for example, has removed references to Part 3 of the Central Bank Reform Act 2010.
For more information on these topics please contact any member of A&L Goodbody's Insurance & Reinsurance team.
Date published: 7 April 2021