Financial Services Regulation & Compliance - Insurance Oct 2017


Central Bank Insurance Directorate holds Annual Industry Briefing

The Central Bank of Ireland's (Central Bank) Insurance Directorate hosted its annual insurance industry briefing on 24 October 2017, including presentations by Sylvia Cronin (Director of Insurance Supervision), Marie Louise Delahunty (Head of Insurance Supervision) and Dr Allan Kearns (Insurance Analytics). Opening the event, Ms. Cronin covered a range of topics including Brexit, outsourcing, internal models, and technology risks. In discussing the latter, Ms. Cronin noted that innovation is essential for the survival of traditional insurers but highlighted the increased risks technology brings and the need to match appetite for innovation with the approach to risk management. Supervisory focuses for 2018 were confirmed to include (amongst others) branch inspections, preparations for Brexit and pricing discipline.

Bill paving way for periodic payment orders nears finalisation

The Government has indicated that the Civil Liability (Amendment) Bill 2017 (which, among other matters, will permit courts to make periodic payment orders as an alternative to lump sum awards in cases of catastrophic injury) will be scheduled for Report and Final Stages during the week commencing 6 November 2017. Assuming this occurs, it is likely that the Bill will be signed into law in the coming weeks.

Central Bank Director of Insurance Supervision delivers speech on Brexit

On 13 October 2017, the Central Bank published a speech by Sylvia Cronin (Director of Insurance Supervision) on Brexit and supervisory convergence. In the context of Brexit, Ms. Cronin reminded potential applicants for authorisation that the process takes a number of months and also highlighted the benefits of early engagement, which can smooth the application process. Among other matters discussed, Ms. Cronin underlined the importance of consistent supervision under the Solvency II regime and noted the Central Bank's approach of aligning itself with European best practice.

Cost of Insurance Working Group publishes third update on progress

On 23 October 2017, the Cost of Insurance Working Group published its third quarterly update on the cost of motor insurance. This provides an update on progress implementing the recommendations contained in the Action Plan from the Report on the Cost of Motor Insurance. Matters completed during the quarter included Phase 1 of the project to establish a database to identify uninsured drivers, and consultation between Insurance Ireland and the Department of Finance on developing a protocol around the requirement for insurers to notify policyholders of claims before settlement. Separately, the update includes an outline progress report of the Working Group's review of employer and public liability insurance (a full stand-alone report will be issued before the end of the Autumn/Winter term).

Insurance Ireland / PWC CEO Survey on insurance industry trends

On 4 October 2017, Insurance Ireland and PWC launched their annual joint "Pulse Survey" report, detailing the views of Irish insurance CEOs on industry trends, challenges and opportunities. Key findings include that 90% of respondents were confident or very confident of business growth, with 63% planning workforce expansions. Challenges highlighted included Brexit, over-regulation and cyber-threats; while opportunities noted included data analytics, artificial intelligence and robotics/automation.


European Parliament calls on Commission to delay application date of IDD; confirms no objection to Delegated Regulations

On 25 October 2017, the European Parliament (EP) adopted decisions confirming no objection to Delegated Regulations supplementing the Insurance Distribution Directive (IDD) in the areas of (a) information and conduct of business requirements for insurance-based investment products (IBIPs), and (b) product oversight and governance. 

Notably, each of the decisions calls upon the Commission to adopt a legislative proposal to delay the application date of IDD to 1 October 2018 (but to retain the Member State transposition date at 23 February 2018). This follows the EP's Economic and Monetary Affairs Committee's (ECON) earlier adoption of recommendations to that effect on 16 October 2017. Insurance Europe (IE) issued a press release on 17 October 2017 welcoming ECON's call for a delay, noting that insurers need to be given sufficient time to implement the IDD and that they can only do this once the final rules are known. The Delegated Regulations will next be considered by the European Council and, if there is no objection, will enter into force 20 days after publication of the Official Journal of the EU.

EIOPA publishes first set of advice on Solvency II Delegated Regulation

On 30 October 2017, the European Insurance and Occupational Pensions Authority (EIOPA) published its first set of advice on specific items in the Solvency II Delegated Regulation ((EU) 2015/35). This follows on from EIOPA's consultation on its proposed advice in July. The advice includes recommendations to simplify aspects of calculating capital requirements, to reduce reliance on external credit ratings in the standard formula and to extend application of the "look-through" approach to related undertakings that invest on behalf of an insurer. EIOPA aims to provide its second set of advice on further aspects of the Delegated Regulation by February 2018.

EIOPA publishes Final Guidelines on Complex Insurance-Based Investment Products

On 11 October 2017, EIOPA published its final report and guidelines on 'complex' insurance-based investment products (IBIPs) under the IDD. The IDD requires insurance distributors to assess the suitability of an IBIP based on a customer's investment knowledge and experience; Member States may, however, derogate from this requirement where there no advice is given and the IBIP is non-complex. The guidelines, which are addressed to those national competent authorities of Member States that have exercised this derogation, set out criteria for the assessment of whether an IBIP is complex.

European Commission publishes study on consumer decision making in insurance services

On 27 October 2017, the Commission published a behavioural study on consumers' decision-making in the non-life insurance sector. The study, which covered sale of home, motor, car rental and add-on insurance, investigates consumer decision making processes when purchasing insurance, both domestically and cross-border, and tests possible solutions to assist consumers in making better decisions. Recommendations included regular assessment of standards for the provision of information to ensure it is clear and easy to understand, harmonisation of contract terms and formats and establishment of standards for price comparison websites.

EIOPA updates on internal model consistency project

On 25 October 2017, EIOPA published an update on the work of its internal model consistency project. This follows on from EIOPA's 2015 Opinion on preparation for Internal Model applications and provides a summary of EIOPA's work in the areas of (a) market and credit risk benchmarking, (b) modelling of sovereign exposures, and (c) modelling of dynamic volatility adjustment. EIOPA notes that it expects to conduct annual comparative studies on modelling of market and credit risk and that its next data request to relevant undertakings will be finalised by year-end.

Corrigendum published concerning delegated regulation on infrastructure corporates

On 13 October 2017, a Corrigendum to Commission Delegated Regulation (EU) 2017/1542 (which amended Commission Delegated Regulation (EU) 2015/35 in respect of regulatory capital requirements for infrastructure corporates) was published in the Official Journal of the EU. The Corrigendum amends the formula for calculation of the capital requirement for equity risk.

EIOPA updates Risk Dashboard

On 26 October 2017, EIOPA updated its risk dashboard based on data provided by insurers and insurance groups for Q2 2017. The update indicates that risks for the insurance sector remained stable during Q2. Key observations included signs of improving profitability for both life and non-life insurance and improved market perception. Continuing concerns include: (a) the low-yield environment; and (b) that market fundamentals may not reflect underlying credit risk.

EIOPA Head of Policy delivers speech on future of European insurance industry

On 5 October 2017, Manuela Zweimuller (EIOPA's Head of Policy) delivered a speech on future challenges for the European insurance industry, focussing on InsurTech, Brexit and regulatory stability. Mr. Zweimuller highlighted that EIOPA's work in InsureTech will centre on the use of "Big Data" by insurers (including ethical standards), cyber risks and supervisory approaches to financial innovation. Other topics discussed included EIOPA's expectations in respect of supervisory convergence on Brexit and future reviews of the Solvency II regime.

EIOPA Chair speaks at hearing of European Parliament Economic and Monetary Affairs Committee

On 9 October 2017, Gabriel Bernardino spoke at a hearing of the European Parliaments Economic and Monetary Affairs Committee in which he updated the Committee on EIOPA's work during the past year, highlighting its input in the areas of supervisory convergence, consumer protection and financial stability. Speaking of future opportunities and challenges, he urged strengthening EIOPA's mandate in preventing failure of insurers with potential cross-border impact and reinforcing EIOPA's role in assessing supervisory independence, transparency and accountability.

EIOPA publishes interviews with Chair and Head of Policy

EIOPA published a number of recent interviews conducted with Gabriel Bernardino (EIOPA Chair) and Manuela Zweimuller (EIOPA's Head of Policy) during October. Mr. Bernadino discussed topics ranging from EIOPA's advice on the review of the Solvency II Delegated Regulation to InsureTech and stress tests. 

Points of note included: (a) while there will be numerous minor adjustments, EIOPA does not expect major changes in terms of capital as a result of its next set of advice on the Delegated Regulation (due February 2018), and (b) 2018 stress tests may include qualitative elements on cyber risks. Mr. Bernardino also spoke about the EP's call on the Commission to postpone application of IDD (see above). Mr. Zweimuller discussed elements of the IDD, including IBIPs and the requirement to act in the best interests of the consumer.

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

Date Published: 8 November 2017