Financial Services Regulation & Compliance - Insurance Dec 2017


Central Bank publishes Insurance Quarterly Newsletter

On 8 December 2017, the Central Bank of Ireland (the Central Bank) published its fourth Insurance Quarterly Newsletter for 2017. The newsletter features the first in a series of articles to be published on risk culture in the insurance sector and provides a number of updates in relation to some recent and ongoing activities of the Central Bank including:

  • its recent review of Regular Supervisory Reports and its review of Actuarial Opinions and Reports on Technical Provisions
  • its ongoing consultations on third country branches and policy renewals. 

The newsletter also features an article on recent developments in the area of anti-money laundering and notes a number of insurance supervisory priorities for the Central Bank for 2018 (and beyond) such as outsourcing and IT, branch inspections, governance and pricing discipline, reserve monitoring and internal models.

Central Bank publishes research into gadget insurance market

On 5 December 2017, the Central Bank published a report based on recent research undertaken to examine the attitude, behaviour and experience of consumers when buying gadget insurance and to identify potential consumer risks in this area.  Key findings highlighted in the report include:

  • Most consumers did not fully understand the scope of cover provided under their policies and thought it covered more than it did.
  • Most consumers did not plan on buy gadget insurance until it was offered to them as an add-on at the point of sale and were more focussed on the purchase of the gadget itself rather than the insurance cover.
  • Most purchases were based on verbal explanations given by retail staff selling the gadget rather than written information provided,
  • Consumers were generally only offered one insurance option by retailers and did not shop around.  

According to the report, these (and other) findings from the research are being used to complement a thematic review of the sale of gadget insurance which will be published in 2018.

Central Bank publishes industry letters issued to insurers in December 2017

The Central Bank has published two industry letters issued to insurers in December 2017.  The first letter is addressed to CEOs and outlines the findings of a review carried out by the Central Bank of the first regular supervisory reports (RSRs) submitted by insurers in 2017.  The letter highlights a number of areas requiring improvement which the Central Bank expects undertakings to consider in preparing their next RSRs. The letter notes that many of its observations in relation to RSRs are also relevant to solvency and financial condition reports. 

The second letter is addressed to heads of actuarial functions and summarises the findings of a review carried out by the Central Bank of actuarial opinions and reports on technical provisions under the domestic actuarial regime and related governance requirements under Solvency II. 

Personal Injuries Commission recommends standardised approach on whiplash

The Personal Injuries Commission has published its first report covering phase one of its 18-month work programme.  The report notes that the frequency of whiplash claims in Ireland appears to be significantly higher than many other European countries and recommends adopting a standardised and internationally recognised approach to diagnosis, treatment and reporting of whiplash in Ireland by medical practitioners who are appropriately competent and trained.  Subsequent reports will focus on internationally benchmarking compensation award levels in his area.

Government proposes legislation establishing a national claims information database

On 22 December 2017, the Department of Finance published proposals to draw up legislation establishing a national claims information database in the form of a General Scheme of The Central Bank (National Claims Information Database) Bill 2017.  The proposed legislation is designed to facilitate the collection of relevant data by the Central Bank in order to conduct a more in-depth annual analysis of trends in motor claims which the Cost of Insurance Working Group believes is key to developing an understanding of how claims costs are impacting premiums.  


European Commission adopts proposal to delay application of IDD

On 20 December 2017, the European Commission formally adopted a proposal to delay the application of the Insurance Distribution Directive (2016/97) (IDD) beyond its original application date of 23 February 2018 to 1 October 2018.  The European Parliament (as well as 16 Member States) had originally requested the postponement. The application of the two delegated regulations adopted by the Commission under IDD (as formally published in the Official Journal of the European Union on 20 December 2017) will also be postponed until 1 October 2018.

EIOPA publishes opinion on service continuity following Brexit

On 21 December 2017, the European Insurance and Occupational Pensions Authority (EIOPA) published an opinion on service continuity in light of the pending withdrawal of the UK from the European Union.  The opinion, which is addressed to both insurance undertakings and national supervisors, underlines the importance of early preparation for Brexit and emphasises the need for undertakings to take the necessary steps to ensure service continuity and to avoid conducting unauthorised insurance business in the UK or EU post-Brexit (e.g. by undertaking portfolio transfers or establishing UK or EU subsidiaries or branches).  

National supervisors are also advised to take appropriate steps to ensure that undertakings are adequately prepared in this regard and that they have, for example, carried out realistic impact assessments and have allowed sufficient time to implement their Brexit plans.

EIOPA publishes IDD IPID template and Q&A on PRIIPS KID

On 11 December 2017, EIOPA published an electronic editable template Insurance Product Information Document (IPID).  IPIDs must be provided to customers prior to the conclusion of non-life insurance contracts under the IDD. The template follows the layout included in the Annex to the European Commission’s Implementing Regulation of 11 August 2017 laying down a standardised presentation format for the IPID.

On 19 December 2017, EIOPA also published a Q&A covering the conditions that should be used to determine whether to include a comprehension alert in the Key Information Document (KID) for Insurance-Based Investment Products (IBIPs) under the European PRIIPS Regulation (1286/2014).

EIOPA publishes opinion on incentives and remuneration arrangements with asset managers

On 11 December 2017, EIOPA published an opinion on monetary incentives and remuneration arrangements between insurers and providers of asset management services in the unit-linked life insurance market.  The opinion, which follows on from EIOPA's 2017 thematic review on the same subject, highlights EIOPA's concern that insurers may choose underlying funds based on the level of incentives and remuneration.  The opinion calls on national supervisors to take appropriate supervisory action including issuing guidance to prevent conflicts of interest in this area and on the selection, monitoring and review of asset managers and underlying funds.

EIOPA publishes sixth Consumer Trends Report

On 8 December 2017, EIOPA published its sixth Consumer Trends Report covering recent consumer related developments in the EU insurance and pensions sector.  Among other matters, the report notes the emergence of new 'InsurTech' participants in the market, as well as an increase in partnerships between technology companies and established insurance companies seeking to upgrade their digital capabilities. Other matters examined include an increase in consumer complaints and the consumer protection activities of EU supervisors.

EIOPA publishes analysis of first solvency and financial condition reports

On 18 December 2017, EIOPA published a supervisory statement concerning its analysis of the 2016 solvency and financial condition reports (SFCRs) submitted by (re)insurers and (re)insurance groups. In its statement, EIOPA notes that the majority of SFCRs were published on time and generally complied with Solvency II requirements.  However, the statement highlights a number of areas for improvement in future SFCRs, including in relation to own-risk and solvency assessments (ORSAs) and own-funds.

EIOPA publishes Annual Group Insurance Statistics

On 19 December 2017, EIOPA published its annual Solvency II group insurance statistics. The statistics provide EEA level information on balance sheets, own funds and premiums, claims and expenses.  The statistics are based on reporting from (re)insurance groups in 2016.

EIOPA publishes series of annual Solvency II reports

On 21 December 2017, EIOPA published its Annual Report on Long-Term Guarantee Measures and Measures on Equity Risk for 2017. The report shows that most of the measures are widely used across the EU.  According to the report, the importance of the measures is highlighted by the fact that the average solvency capital requirement ratio of undertakings using them would drop from 217% to 148% if they were not applied. 

On 21 December 2017, EIOPA also published its 2017 annual report on the use of exemptions and limitations by (re)insurance undertakings from regular supervisory reporting as well as its first annual report on the use of capital add-ons.

EIOPA publishes bi-annual Financial Stability Report

On 20 December 2017, EIOPA published its second bi-annual Financial Stability Report for 2017.  The report identifies and details key risks for the insurance and occupational pension sectors.  A key focus of the report is the persisting low-yield environment and the search-for-yield behaviour being observed in the insurance sector. The report notes that traditional asset classes are being affected by the low yield environment and that, whilst increased exposure to other asset classes (e.g. infrastructure) improves diversification, it also demands new risk management capabilities from insurers and closer supervisory attention.  According to the report, profitability levels in the sector remain low but positive for the time being. 

EIOPA publishes opinion on the assessment of internal models

On 20 December 2017, EIOPA published an opinion addressed to national supervisors calling for a consistent supervisory approach to assessing internal models including a dynamic volatility adjustment (DVA).  The opinion stresses the importance of common supervisory practices generally but notes, in particular, that DVA modelling is an area where supervisory convergence needs to be reinforced. 

Insurance Europe publishes paper on collective redress

On 19 December 2017, Insurance Europe (IE) published a position paper on collective redress mechanisms.   In its paper, IE confirms its support for the safeguards set out in the European Commission’s recommendations of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms concerning violations of rights granted under EU law.  However, IE is of the view that it is still too early for EU legislation on collective redress and that it favours a 'soft-law' approach in the meantime.

For further information please contact a member of the Financial Regulation team.

Date Published: 10 January 2018