Financial Services Regulation & Compliance - Insurance Feb 2018

DOMESTIC

Central Bank Director of Insurance Supervision speech on governance and role of independent directors

On 22 February 2018, the Central Bank of Ireland (CBI) published a speech by Sylvia Cronin (Director of Insurance Supervision) on the topics of corporate governance and the role of independent non-executive directors (INEDs).  Among other matters, Ms Cronin emphasised the need for INEDs to have a deep understanding of their firm's business, including markets, products offered, business strategy, conduct risk and adequacy of control functions.  Ms Cronin also spoke of the importance of an effective board culture in which members can freely express their views, and said this should be monitored and discussed regularly.

Cost of Insurance Working Group publishes fourth update on progress

On 20 February 2018, the Cost of Insurance Working Group (CIWG) published its fourth quarterly update on the cost of motor insurance.  This provides an update on progress implementing each of the recommendations contained in the Action Plan from the Report on the Cost of Motor Insurance.  Matters completed during the quarter included consultations by the CBI on information to be provided at renewal and a review by Insurance Ireland on industry use of telematics.  The update also includes an annual review of developments during 2017.

Department of Finance consults on National Claims Information Database

On 6 February 2018, the Department of Finance published a consultation on the proposed Central Bank (National Claims Information Database) Bill, which is to implement the CIWG's recommendation to establish a National Claims Information Database, which will initially focus on motor insurance claims.  The consultation, which closes on 9 March 2018, seeks stakeholders' views on matters including:

  • The types of information to be collected.
  • Disclosure of information (proposed to be on an anonymous aggregated basis).
  • Proposals to fund the database through an industry levy model.

EUROPEAN

Council of EU confirms IDD delay

On 14 February 2018, the Council of the EU issued a press release in which it confirmed its agreement to proposals to postpone the deadline for transposition of the Insurance Distribution Directive (Directive 2016/97/EU) (IDD) to 1 July 2018, and the application date to 1 October 2018 (at the latest).  The proposed amending directive was adopted by the European Parliament (EP) on 1 March.  Once adopted by the Council, it will apply retrospectively from 23 February 2018. 

Separately, the EP has published its decision not to raise objections to a European Commission delegated regulation which will similarly amend the application date of the delegated regulations made under the IDD (concerning (a) product oversight and governance, and (b) information requirements and conduct of business rules in respect of insurance-based investment products) to 1 October 2018.  The EP's procedure file has also been updated to indicate that the Council had not objected to the amending delegated regulation.

EIOPA issues second set of advice on amendments to the Solvency Capital Requirement

On 28 February 2018, the European Insurance and Occupational Pensions Authority (EIOPA) issued its second set of advice to the Commission on possible amendments to the Solvency Capital Requirement.  In its cover letter to the Commission, EIOPA notes that its advice includes a mixture of revised calibrations, simplifications, removal of technical inconsistencies, and proposals for achieving greater supervisory convergence. 

EIOPA's recommendations include, amongst other matters, revised calibrations to natural catastrophe risks and assistance and medical expenses, and new calibrations to interest rate risk.  EIOPA has also developed a set of key principles in the area of the loss-absorbing capacity of deferred taxes in order to achieve greater supervisory convergence.

EIOPA publishes paper on systemic risk and macroprudential policy in the insurance sector

On 6 February 2018, EIOPA published the first in a series of papers concerning systemic risk and macroprudential policy in insurance.  The paper aims to contribute to the ongoing debate on systemic risk and macroprudential policy and ensure that any extension of that debate to the insurance sector reflects the specific nature of insurance business.  The paper includes:

  • Lessons learned from the financial crisis.
  • Current status of the debate in insurance.
  • Main sources of systemic risk in insurance (broken down into entity-based, activity based, and behaviour based).
  • A proposal for a macroprudential framework for insurance.

Insurance Europe publishes Brexit position papers

On 9 February 2018, Insurance Europe (IE) published two position papers concerning the impact of Brexit.  In the first of its papers, IE highlights the continuing uncertainty for insurers offering cross-border contracts and calls on the UK and EU to agree a transitional arrangement to ensure business continuity until legal certainty on the future relationship between the parties is reached. 

The second paper focuses on transfers of personal data and the potential disruption Brexit will cause to such transfers when the UK becomes a "third country".  The paper includes a discussion on possible solutions and ultimately calls on the EU Commission and the UK to commence procedures to assess and determine each other's data protection regimes as adequate, as soon as possible, to avoid business disruption.

Insurance Europe responds to EIOPA call for input on reporting and disclosure

On 22 February 2018, IE published its response to an EIOPA "call for input", published at the end of January, in which EIOPA sought input on validations to be included in version 2.3.0 of the XBRL Solvency II reporting taxonomy, as well as any corrections needed to EU Commission Implementing Regulations 2015/2450 and 2015/2452 (concerning reporting and disclosure).  In its response, IE raises a number of technical points and concerns, including in the areas of look-through and reporting of nominated external credit assessment institutions.

European Parliament publishes resolution on EU/USA Bilateral Agreement on prudential measures regarding insurance and reinsurance

On 1 March 2018, the EP published a provisional version of its resolution on the bilateral agreement between the EU and the USA on prudential measures regarding insurance and reinsurance, in which the EP confirms its consent to conclusion of the agreement.

European Commission publishes notice on the impact of Brexit on EU (re)insurance rules

On 8 February 2018, the European Commission published a "Notice to Stakeholders" in which the Commission reminded all stakeholders of the impact of Brexit on (re)insurers operating in the UK and the EU.  The Notice, which is part of a broader series concerning financial services, outlines the main consequences of EU (re)insurance rules ceasing to apply in the UK, including loss of passporting rights and implications for servicing existing contracts.

EIOPA publishes Solvency II statistics

On 13 February 2018, EIOPA published a new set of statistics on the European insurance sector based on Solvency II reporting data.  The statistics provide country level information on balance sheets, own funds, premiums, claims and expenses based on reporting from solo (re)insurance undertakings for the second quarter of 2017.

EIOPA Decision on annual market and credit risk modelling comparative study

On 12 February 2018, EIOPA published a decision of its supervisory board on an annual market and credit risk modelling comparative study, which aims to compare risk charges for a selection of asset portfolios to be used as a tool for the supervisory review of internal models.  The decision provides that undertakings with significant exposure to assets denominated in Euro and an internal model covering market and credit risk are expected to take part in the study and will be informed by their national supervisor.  Relevant insurers should fill out the data request and provide relevant documentation to their supervisor by 30 June 2018.

Insurance Europe publishes annual insurance data

On 28 February 2018, IE published its "European Insurance in Figures", based on 2016 data collected from IE member associations.  Amongst other matters, the report notes that EU insurers generated gross direct premium income of €1,189bn during 2016, with total claims and benefits paid of €963bn.    The report also provides an overview of consolidation in the insurance industry, with the number of insurers in Ireland growing by 8.9% in 2016.

EIOPA Chair Speech on the Review of Solvency II

On 5 February 2018, EIOPA published a speech delivered by its chair, Gabriel Bernardino, on ongoing and planned reviews of Solvency II.  Amongst other matters, Mr Bernardino discussed EIOPA's advice and approach to its review of elements of the Solvency Capital Requirement, Long Term Guarantee measures, recovery and resolution mechanisms and a macro-prudential framework, all of which EIOPA believe should be considered as part of the overall Solvency II review due in 2021.

Solvency II Implementing Regulation – calculation of technical provisions & basic own funds

On 31 January 2018, the European Commission adopted a new Implementing Regulation (EU/2018/165) on the calculation of technical provisions and basic own funds for the purpose of Solvency II reporting with reference dates from 31 December 2017 to 30 March 2018.  The Implementing Regulation was published in the Official Journal of the EU on 3 February 2018; and it entered into force on 4 February 2018.

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

Date Published: 15 March 2018