Financial Services Regulation and Compliance - Insurance Oct 2020
DOMESTIC
The CBI publishes consumer FAQs on differential pricing in insurance
As part of its review into differential pricing in the insurance sector, the Central Bank of Ireland (the CBI) has published consumer friendly information in the form of a list of questions and answers on differential pricing. The publication explains the CBI's investigation into dual pricing and describes how it can affect the price of car and home insurance. The CBI encourages consumers to shop around when taking out or renewing their policy and explains how this can be done.
Rescission of Guidelines on Reinsurance Cover of Primary Insurers and the Security of their Reinsurers
On 5 October 2020, the CBI released an insurance policy update noting that it has rescinded the guidelines on the Reinsurance Cover of Primary Insurers and the Security of their Reinsurers from 14 September for undertakings subject to Solvency II. The guidelines were retained post the introduction of Solvency II pending further review. As a result of this review, the CBI has concluded that the guidelines are no longer relevant to (re)insurance undertakings subject to Solvency II. However, they will continue to apply for non-Solvency II undertakings.
The CBI Publishes its latest quarterly newsletter
The CBI recently published the latest edition of its Insurance Quarterly Newsletter. This is the first newsletter published in 2020 as it was temporarily suspended due to the COVID-19 pandemic. Featured topics include the ongoing uncertainty in the insurance sector due to COVID-19 and related expectations of the CBI for firms; business interruption insurance; the recently published differential pricing industry letter; and diversity & inclusion in the insurance sector. The newsletter provides a series of additional updates on a range of topics including, for example: the CBI's plan to issue an emerging risk survey later this year and the CBI's consultation on recovery and resolution planning.
Government publish the eleventh and final Progress Report of the Cost of Insurance Working Group
On 30 October 2020, the Eleventh and Final Progress Report of the Cost of Insurance Working Group (the CIWG) was published by the Department of Finance. The report covers the work carried out by the CIWG to date in 2020. The report deals with a number of topics including the cost of motor insurance and the cost of employer and public liability insurance.
This is the final report of the CIWG. The reform agenda outlined in the Programme for Government will be led by the newly established Cabinet Committee on Economic Recovery and Investment’s sub-Group on Insurance Reform.
EUROPEAN
EIOPA issues its key priorities in light of the COVID-19 pandemic
On 30 September 2020, EIOPA outlined its key priorities for 2021-2023 in the Single Programming Document, adopted by the EIOPA Board of Supervisors on 29 September 2020. EIOPA's priorities take into account the current market situation in light of the COVID-19 pandemic, as well as political priorities defined by the European Commission and include (among other matters):
- COVID-19 crisis management, risk mitigation and active support to the recovery of the European economy
- consumer protection in light of increasing risks emerging from the COVID-19 pandemic
- digitalisation and cyber risk
- sustainable finance
- supervisory convergence
- financial stability of the insurance and occupational pensions sectors as well as the introduction of the pan-European Personal Pension Product
EIOPA launches study on diversification models
On 1 October 2020, EIOPA launched a study into diversification in internal models.
The objectives of the study are:
- to gain an overview of the current approaches in the market and, on a best effort basis, analyse and compare the levels of diversification
- to facilitate a better understanding of modelling dependencies, aggregation and resulting diversification benefits
- to enhance quality and convergence of supervision on diversification in internal models
Insurance undertakings must submit results to their group national supervisory authority by 15 January 2021.
EIOPA consults on the supervision of the use of climate change scenarios in ORSAs
On 5 October 2020, EIOPA published a consultation on the use of climate change risk scenarios in the Own Risk and Solvency Assessment (ORSA) in the form of a draft supervisory opinion. The opinion sets out EIOPA’s expectations to national competent authorities on how to supervise the integration of climate change scenarios by insurers in their ORSA, applying a risk based and proportionate approach. The opinion also provides practical guidance on the selection and implementation of scenarios. This consultation is a follow-up to EIOPA's Opinion on Sustainability within Solvency II dated 30 September 2019 and EIOPA has invited stakeholders to provide their views on the consultation by filling in the survey by 5 January 2021.
EIOPA publishes its approach to the supervision of product oversight and governance
On 8 October 2020, EIOPA outlined its approach to the supervision of product oversight and governance (POG) requirements. The paper aims to support insurance manufacturers and distributors when implementing their own POG policies and to facilitate their engagement with national supervisors. Insurance manufacturers and distributors should take into account their business model, product complexity, and characteristics of the target market in their policies and processes. Supervisors will focus on how insurers and distributors ensure customer-centric business product design, approval and distribution process with adequate systems and controls in place by:
- establishing whether target markets for each product are adequately defined
- assessing whether product testing sufficiently assesses the fairness and the value of each product
- determining whether distribution strategies are adequate
EIOPA's approach to POG supervision is based on the IDD requirements and aims to provide clarity for insurance manufacturers and distributors on what to expect from the supervisory approach to POG requirements.
EIOPA publishes updates regarding information for Solvency II relevant risk free interest rate term structures, symmetric adjustment to equity risk and representative portfolios for calculation of volatility adjustments
On 5 October 2020, EIOPA published updated 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 September in both cases. On the same date, EIOPA published updated representative portfolios that will be used for calculation of the volatility adjustments to the relevant risk free interest rate term structures for Solvency II.
EIOPA finalises guidelines on information and communication technology security and governance
On 12 October 2020, EIOPA published its final guidelines on information and communication technology security and governance. The ICT guidelines seek to enhance the operational resilience of insurance and reinsurance undertakings' digital operations.
In particular, the ICT guidelines:
- provide transparency to market participants on the minimum expected information and cyber security capabilities
- avoid potential regulatory arbitrage
- foster supervisory convergence regarding the expectations and processes applicable in relation to ICT security and governance
The ICT guidelines shall apply from 1 July 2021.
EIOPA publishes third annual European Insurance Overview
On 21 October 2020, EIOPA published its Annual European Insurance Overview (AEIO). The AEIO provides a user-friendly overview of the European (re)insurance sector which is based on annually reported Solvency II information for the year-end 2019. The AEIO is aimed at supporting the supervisory community and industry with highly relevant and easily accessible data at European level with the information contained in the report entirely date driven. The AEIO covers a number of topics including an overview of the life and non-life markets, information on solvency and capitalisation and information on investments made by the European (re)insurance sector.
EIOPA calls on insurance sector to complete preparations for the end of the UK transition period
On 13 October 2020, EIOPA issued a statement urging the insurance sector to finalise preparation and implement suitable and realistic contingency plans in advance of the end of the UK's transition period on 31 December 2020. In particular, EIOPA encouraged the insurance sector to ensure that that there are measures in place to prevent insurance activity without authorisation and ensure service continuity of cross-border business in order to minimise the detriment to policyholders or beneficiaries.
Additionally, EIOPA also reminded insurance undertaking and intermediaries of their duty to inform customers about the possible impact of the UK's withdrawal from the EU. EIOPA confirmed that it will continue to monitor preparations of the insurance sector, with a particular emphasis on the development and implementation of contingency plans.
EIOPA launches targeted training on insurance supervision
On 21 October 2020, EIOPA launched a program of targeted training on insurance supervision for 17 national competent authorities. The training is intended to enhance the supervisory capacity of insurance national competent authorities to reinforce:
- high-quality and effective supervision
- protection of policyholders and beneficiaries
- financial stability
The intention is that the training will promote a common supervisory culture and enable national supervisory authorities to implement the necessary practices and supervise compliance with Solvency II requirements.
For more information on these topics please contact any member of A&L Goodbody's Insurance & Reinsurance team.
Date published: 9 November 2020