Financial Services Regulation & Compliance - Insurance June 2018

DOMESTIC

Department of Finance publishes European Union (Insurance Distribution) Regulations 2018

On 29 June 2018 the Department of Finance published the European Union (Insurance Distribution) Regulations 2018. The Regulations transpose the Insurance Distribution Directive (Directive 2016/97/EU) (IDD) into Irish law and will come into force on 1 October 2018. In addition to transposing the IDD, the regulations revoke the European Communities (Insurance Mediation) Regulations 2005 and make a number of insurance related amendments to the Investment Intermediaries Act 1995.

CBI publishes June edition of Insurance Quarterly

The CBI has published the June edition of its Insurance Quarterly publication. The publication covers a range of topics, including:

  • Brexit, in particular, the questions that (re)insurers need to be considering and on which they can expect greater supervisory focus
  • CBI observations on look-through reporting in respect of collective investment undertakings
  • competency in risk culture (the third) in a series of CBI articles on risk culture

Bill published clarifying role of Insurance Compensation Fund

The Irish Government has published the Insurance (Amendment) Bill 2018. This clarifies the role of the Insurance Compensation Fund (ICF) in light of the Setanta case and implements the recommendations of the Review of the Framework for Motor Compensation in Ireland Report. Proposed changes include:

  • increasing the level of coverage for third party motor claims to 100% for personal injuries and to €1,220,000 per claim in respect of property
  • providing for a new Motor Insurers Bureau of Ireland fund which will be funded by a levy on motor insurers and reimburse the ICF for any payments over and above the current level of cover for third party claims (i.e. the lesser of 65% or €825,000)
  • transferring administration of the ICF from the Accountant of the Courts of Justice to the CBI

CBI consults on changes to domestic actuarial regime and related governance requirements

On 22 June 2018 the CBI published a consultation paper on proposed changes to the Domestic Actuarial Regime and related governance requirements under Solvency II. These include the introduction of new governance and reporting requirements for with-profits business. The requirements will apply to existing books from January 2020 but will be applied proportionately, with the possibility of exemptions in certain cases.  Submissions are invited until 14 September 2018.

Director of Insurance Supervision delivers speech with key focus on diversity

On 13 June 2018 the CBI's Director of Insurance Supervision, Sylvia Cronin, delivered a speech with a key focus on diversity. Among other matters, Ms. Cronin discussed how diversity of thought is fundamental to good decision making, particularly in terms of having a broad mix of people with different backgrounds, gender, age and skills. He also noted that the CBI is concerned about the relatively low level of diversity on Irish boards as highlighted in the results of a recent CBI survey on board diversity. Ms.Cronin also touched on the CBI's future plans in this area, which include: (a) a review of succession planning and challenging PCF holders (during PRISM interviews) on diversity; and (b) a mandatory survey of (re)insurers in 2019 to assess levels of diversity in senior management. 

EUROPEAN

EIOPA calls on supervisors to remind insurers of duty to advise customers of Brexit impact

On 28 June 2018 the EIOPA published an opinion (and accompanying FAQ document) calling on national supervisors to remind insurers of their duty to provide customers with information about the possible impact of Brexit on insurance contracts and of the contingency measures taken to deal with this. Insurers should also provide this information to intermediaries to enable them to inform their customers. 

Proposal to adapt PII and financial capacity amounts under IDD

On 27 June 2018 EIOPA issued a press release confirming that it has submitted draft regulatory technical standards to the European Commission adapting the base euro amounts for professional indemnity insurance (PII) and for the financial capacity of intermediaries under IDD. The proposed new amounts are: (i) €1,300,380 per claim and €1,924,560 in the aggregate for PII; and (ii) €19,510 for financial capacity. If endorsed by the Commission, the RTS will enter into force on the twentieth day following its publication in the Official Journal of the EU.

EIOPA expects insurers to avoid instruments banned or restricted by ESMA

On 1 June 2018 EIOPA issued a statement on consumer detriment resulting from policyholder exposure to contracts for differences (CFDs) and binary options.  EIOPA expects insurers to avoid instruments for which the ESMA has issued a ban or restriction for the purposes of distribution to retail clients.  This follows the adoption by ESMA of temporary product intervention measures on the provision of CFDs and binary options to retail investors in the EU on the basis that some features of these products raise significant investor protection concerns and are inappropriate for the majority of retail investors. 

Commission requests advice on group supervision and cross-border insurance business

On 21 June 2018, EIOPA published a letter from the Commission requesting advice on the possible benefits of enhancing group supervision and capital management within groups. Advice has also been requested on a number of issues related to cross-border insurance business carried out on a branch or services basis. Among other things, EIOPA has been asked for advice on early intervention in groups, reporting of intra-group transactions and risk concentrations, insurance guarantee schemes and the scope of group supervision. EIOPA is to report back to the Commission by 1 November 2018.

Commission adopts delegated regulation on STS securitisations

On 1 June 2018, the Commission adopted a delegated regulation amending Commission Delegated Regulation (EU) 2015/35 so as to align with Regulation 2017/2402 (the STS Regulation). The STS Regulation establishes new frameworks for securitisation and "simple, transparent and standardised" or "STS" securitisations and amends the Solvency II Directive to take account of these. The amendments are intended to apply from 1 January 2019.

Commission proposal requires environmental, social and governance preferences to be factored into suitability assessments under IDD

The Commission has proposed amending IDD Delegated Regulation 2017/2359 to require insurance distributors to take environmental, social and governance preferences into account in carrying out suitability assessments for insurance-based investment products. Suitability statements will also be required to include information on how any product recommended to them meets these preferences.   

EIOPA publishes expanded Solvency II statistics

On 21 June 2018, EIOPA published a new set of statistics on the European insurance sector based on Solvency II reporting data for the fourth quarter of 2017. The statistics provide country level information on balance sheets, own funds, premiums, claims and expenses. For the first time, the data also includes detailed statistics on exposures, including types and locations at an EEA and country level, asset classifications and real estate exposures.

EIOPA publishes Annual Report 2017

On 15 June 2018, EIOPA published its Annual Report for 2017. This provides an overview of EIOPA's activities during 2017, including in the areas of supervisory convergence, consumer protection and financial stability.

EIOPA publishes Financial Stability Report

On 25 June 2018, EIOPA published its first bi-annual Financial Stability Report for 2018. This identifies market trends and financial stability issues for the insurance and occupational pension sectors.  The report notes that climate related risks are among the top global risks in 2018, with weather related disasters becoming both more severe and more frequent, while low interest rates continues to be the main risk facing insurers.

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

Date Published: 10 July 2018