Tracker, Financial Services Regulation & Compliance - Insurance
Central Bank publishes consultation paper on industry funding levies
On 27 March 2017, the Central Bank of Ireland (CBI) published a consultation paper on its proposals to revise the way its industry funding levy is to be calculated for certain regulated firms (including EEA insurers passporting into Ireland). The key changes for such insurers are the creation of 'categories' of inward passporting insurers which will determine the level of rate payable. The paper also states that the CBI will shortly consult on (a) ongoing/continuous levying proposals for Irish authorised insurers and (b) a possible further change to the levy methodologies for inward passporting insurers.
Speech by CBI – Investment, Brexit, Cyber Risk
On 9 March 2017, the CBI's Director of Insurance Supervision gave a speech relating to (a) investment returns (b) Brexit and (c) IT and cyber security risk. Amongst other matters, this highlighted the CBI's expectation that insurers apply a range of stresses/scenarios to ensure robust business models (and confirmed that the CBI would be conducting a stress test exercise of the non-life market during 2017). Other updates included that the CBI's recent review of IT and cyber security risk indicated areas of concern including that 63% of insurers did not have Board-approved IT and cyber security strategies.
Central Bank publishes new look Insurance Quarterly newsletter
On 1 March 2017, the CBI published its latest Insurance Quarterly newsletter. Amongst other matters, it highlights that the first set of Solvency II annual returns is due in May 2017 and encourages (re)insurers to use the CBI's external user acceptance testing facility between 17 and 21 April. It also reminds firms to renew their annual Legal Entity Identifier (LEI) code(s) and includes key points on completing Solvency Financial Condition Reports (SFCR).
Solvency II Implementing Regulation – calculation of technical provisions & basic own funds
The European Commission recently adopted an Implementing Regulation (EU/2017/309) on the calculation of technical provisions and basic own funds for the purpose of Solvency II reporting (for the period 31 December 2016 until 30 March 2017). The Implementing Regulation was published by the European Commission in the Official Journal of EU on 28 February 2017 and it entered into force on 1 March 2017.
Regulatory Technical standards on KIDs for PRIIPs
On 8 March 2017, the European Commission adopted a Delegated Regulation supplementing the Regulation on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs). This lays down technical rules on the presentation, content, review and revision of KIDs; and the conditions for fulfilling the requirement to provide KIDs. The rules apply from 1 January 2018. However, PRIIPs manufacturers may (in certain circumstances) continue to use 'key investor information' documents drawn up under the UCITS rules until 31 December 2019.
EIOPA publishes 2016 report on functioning of colleges and priorities for 2017
On 1 March 2017, the European Insurance and Occupational Pensions Authority (EIOPA) published its 2016 year-end report on the functioning of colleges of supervisors and priorities for 2017. The Report notes improved quality of discussions/activities following implementation of Solvency II. However, amongst its other observations, EIOPA notes that Own Risk and Solvency Assessments (ORSAs) at group and solo level would benefit from (a) enhanced forward-looking aspects, and (b) consideration of scenarios which address specific group businesses/ risks. College priorities for 2017 include (a) further developing the efficiency and impact of the exchange of information and of joint risk assessments, and (b) ensuring robustness and reliability of the Solvency II balance sheet.
EIOPA publishes monthly technical information
On 7 March 2017, EIOPA published technical information on (a) the symmetric adjustment of the equity capital charge and (b) relevant risk free interest rate term structures, for Solvency II purposes; with reference to the end of February 2017 in both cases.
Long-term guarantees – EIOPA requests information
On 3 March 2017, EIOPA requested information from Solvency II (re)insurers in order to complete its second long-term guarantee (LGT) report. The deadline for submission of the relevant information to national supervisors is 15 June 2017. EIOPA is due to publish its report this year as part of its wider review of LGT measures and measures on equity risk.
EIOPA Chairman speech on third-country equivalence
On 9 March 2017, EIOPA's Chairman, delivered a speech to the Committee on Economic and Monetary Affairs of the European Parliament (ECON) regarding EIOPA's role in the assessment of third-country equivalence under Solvency II. As well as describing the assessments already undertaken (e.g. in relation to Switzerland, Bermuda and Japan) he emphasised the importance of regularly reviewing those assessments (taking any relevant developments into account).
EIOPA Chairman speech on small/medium-sized insurers
On 3 March 2017, EIOPA's Chairman delivered the keynote speech to a Solvency II conference hosted by IVASS (the Italian insurance supervisor) focussed on small/medium sized insurers. This focussed on (a) the principle of proportionality (including its implementation and practical application by national supervisors) (b) supervisory convergence and building a common supervisory culture in Europe and (c) the impact of digitalisation on the insurance industry and such insurers.
Insurance Europe responds to EIOPA's Solvency II discussion paper
On 8 March 2017, Insurance Europe (IE) published its response to EIOPA's discussion paper on its review of aspects of the Solvency II Commission Delegated Regulation ((CDR) (EU 2015/35)). A key focus of the discussion paper (published in December 2016) is the SCR standard formula. IE expresses its view that several aspects of the Solvency II package require further careful discussion. These include the loss absorbing capacity of deferred taxes, risk margins, the 'look-through' approach and the treatment of guarantees.
IE calls for bolder action on Capital Markets Union objectives
On 17 March 2017, IE responded to the European Commission's mid-term review on the Capital Markets Union (CMU). The response calls for investment barriers affecting insurers (which are not reflective of the nature of insurers investment activities) i.e. typically, long-term to be tackled. IE also calls for development of suitable infrastructure and private placements investments, urges consumer protection improvements by permitting digital delivery of disclosures and reducing information overload.
IE comments on recovery and resolution frameworks
On 6 March 2017, IE published its response (dated 28 February 2017) to EIOPA's consultation on recovery and resolution (R&R) frameworks. This acknowledges that bolstered financial stability and consumer protection could be achieved by increasing principle-based cooperation between supervisors. However it cautions against early supervisory interventions (unless, for example, for SCR/ MCR breaches) and recommends only invoking resolution powers as a last resort. It also emphasises that any R&R framework changes should provide legal certainty for (re)insurers.
IE responds to ESA paper on big data analytics
On 22 March 2017, IE published a position paper responding to a European Supervisory Authorities (ESAs) consultation paper on the use of big data analytics. This acknowledges the potential benefits (e.g. tailored policies, risk reduction) and risks (e.g. risk segmentation, access to services) associated with the use of such analytics in insurance. Notably, IE is of the view that certain concerns/risks identified by the ESA arise from the nature of insurance business itself (regardless of technological developments) and can be adequately addressed by recent and pending legislative developments.
EIOPA responds to ECON comments on methodology on ultimate forward rate under Solvency II
On 14 March 2017, EIOPA issued a response to the European Parliament's ECON comments on EIOPA's review of the method of calculating the ultimate forward rate (UFR) for Solvency II purposes. EIOPA confirmed (a) it has undertaken the additional impact assessment suggested by ECON (b) it is assessing how to address concerns on annual changes to the UFR, (c) the first application of the UFR methodology may be delayed (from June 2017 until later in 2017, envisaged to be before the end of the year) and (d) EIOPA's Board of Supervisors was scheduled to decide on the UFR methodology and its first application at the end of March 2017.
For further information please contact a member of the Financial Regulation team.
Date published: 05 Apr 2017