Tracker, Financial Services Regulation & Compliance - Insurance


CBI publishes revised Insurance Quarterly newsletter
On 1 July 2016 the Central Bank of Ireland (CBI) re-published a slightly revised version of the Insurance Quarterly newsletter (originally published on 29 June 2016). The amendment relates to the currency in which undertakings must report their claims data. The CBI has decided that undertakings are not required to report information in templates S.16.01.01 and S.19.01.01 in the undertaking's reporting currency. Instead, information by currency in those templates must be reported in the original currency of the contracts concerned.

Insurance Ireland reiterates concerns over claims costs related to rising motor premiums
In a follow up to its June statement on the rising costs of insurance (which is leading to increased premiums), Insurance Ireland issued further statements on 1 and 14 July 2016 on the cost of motor claims in Ireland.  Interesting statistics highlighted include that 80% of motor injury claims in Ireland are for whiplash with the average settlement being €15,000 (compared to the UK average of €5,000).  Attention is also drawn to the 21.2% increase in average Circuit Court awards during 2015, which is stated to be a result of the increase in Court jurisdiction limits which occurred in 2014.  Insurance Ireland called for action to be taken to address the situation. Its suggestions include (a) stronger powers for the Injuries Board to resolve claims, (b) increased resources for road traffic enforcement, (c) internationally benchmarked awards, and (d) a change to how costs of insurer failures are borne by the insurance industry (and, ultimately, policyholders).

Insurance Ireland statement on open-ended proposal for insurers in liquidation
On 25 July 2016, Insurance Ireland published a statement opposing the Department of Finance's recent recommendation that liabilities of any insolvent motor insurer should be assumed by the Insurance Compensation Fund. Insurance Ireland states this would and pose a systemic risk to the Irish motor insurance market.

Insurance Ireland welcomes concept of universal pension for Ireland
On 18 July 2016, Insurance Ireland issued a press release welcoming the endorsement (by the Minister for Social Protection) of universal pension arrangement measures for Ireland.  Noting that a number of its workshops in recent years have focussed on the same issue, Insurance Ireland states that it looks forward to working with stakeholders on the proposal.   



EIOPA launches consultation on policy proposals regarding the implementation of IDD
On 4 July 2016, the European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on technical advice to the European Commission regarding possible delegated acts under the Insurance Distribution Directive (the IDD). This seeks feedback from interested parties on aspects of the IDD including (a) product oversight and governance, (b) organisational arrangements to manage conflicts of interest, (c) rules regarding when inducements can be paid and (d) the information that distributors should obtain from customers on suitability or appropriateness of insurance based investment products.  Submissions are invited until 3 October 2016.

European Commission calls for technical advice from EIOPA
On 20 July 2016, the European Commission requested technical advice from EIOPA in relation to the Commission Delegated Regulation relating to Solvency II (EU/2015/35) (the Solvency II CDR). The Commission identifies certain areas as requiring further clarification, including (a) proportionate application of the requirements, (b) removal of unintended technical inconsistencies and (c) removal of unjustified constraints concerning financing. The Commission has requested EIOPA to provide its advice by 31 October 2017.

PRIIPs KID – in the spotlight
On 30 June 2016, the European Commission published a draft Commission Delegated Regulation (C(2016) 3999) (the draft CDR) laying down regulatory technical standards on key information documents (KIDs) for Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs).  Absent an objection from the European Parliament or the Council of the EU, the CDR will apply from 31 December 2016.  Also on 30 June 2016, Insurance Europe issued a press release voicing disappointment at the draft CDR (and reiterated concerns that the rules contained in it will mislead consumers by making insurance products appear more expensive and riskier than they are).  On 1 July 2016, the Joint Committee of the European Supervisory Authorities (ESAs) published a letter sent to the European Parliament and the Council of the EU on supervisory convergence work on KIDs.  The ESAs intend to publish Q&As to provide clarity on the technical methodologies included in the draft CDR over the summer of 2016.  On 18 July 2016, Insurance Europe published a joint letter with other European representative associations (addressed to the European Commission, European Parliament, Council of the EU and the ESA's) to again raise its concerns about the rules regarding KIDs. This states that essential technical issues were not satisfactorily dealt with during a European Commission and ESA workshop on PRIIPS that occurred on 11 July 2016.

European Commission - Delegated Regulation on product intervention supplementing PRIIPs
On 14 July 2016, the European Commission adopted a draft Commission Delegated Regulation on product intervention; supplementing PRIIPs.  This sets out the proposed criteria for triggering national supervisor and EIOPA product intervention powers (i.e. powers to prohibit or restrict temporarily the marketing/distribution of insurance based investment products), and the factors to be taken into account in this regard. The Council of the EU and the European Parliament must now consider the draft Delegated Regulation (which is currently intended to apply from 31 December 2016).

UK Supreme Court permits setting aside of settlement in light of fraudulent misrepresentation
On 27 July 2016, a judgment of the UK Supreme Court (Hayward v Zurich Insurance Company plc, [2015] EWCA Civ 327) confirmed that the insurer involved could set aside a settlement agreement reached with a claimant under one of its policies; on the basis that the claimant had significantly (and deliberately) exaggerated the extent of his injuries/loss.  Evidence was discovered post-settlement that this had been the case.  Ultimately, the liability of the insurer was a significantly lower sum than (i.e. only 10% of) that originally specified in the settlement agreement.  The obligation of the claimant in that case to repay monies previously paid to him by the insurer in excess of the liability sum, was also confirmed by the UK Supreme Court.  Importantly, the judgment provides precedent for recourse for insurers in cases where they are faced with a claim which they view as suspicious (but cannot conclusively prove to be fraudulent) and post-settlement evidence comes to light which proves fraudulence.

EIOPA – final report on identification and calibration of infrastructure corporates
On 30 June 2016, the European Insurance and Occupational Pensions Authority (EIOPA) published its final report on the identification and calibration of other infrastructure investment risk categories (infrastructure corporates).  The report includes EIOPA's final advice on (a) calibration of equity and debt investment in infrastructure corporates and (b) scope and qualifying criteria, as well as risk management requirements, for infrastructure projects and infrastructure corporate equities.  Amongst other matters, EIOPA recommends that "project like" corporates be permitted to qualify for the risk charges relevant to infrastructure projects.

Insurance Europe mock-up of standardised insurance product information
The IDD will require (re)insurers and intermediaries to provide certain pre-contract product information to customers.  For non-life insurance, this information is to be provided in a standardised format produced by the product manufacturer.  The information to be included is detailed in the IDD.  However, its format and presentation is to be the subject of implementing technical standards to be developed by EIOPA.  On 20 July 2016, Insurance Europe published mock-ups of possible forms of information document on its website; together with some commentary. This includes that the information documents should permit cross-referencing to other documentation (e.g. policy terms and conditions), employ a combination of graphics and text, be non-personalised and include a disclaimer. 

Insurance Europe comments on EIOPA's proposed UFR methodology
On 18 July 2016, Insurance Europe published comments on EIOPA's consultation on potential changes to the methodology for calculating the Ultimate Forward Rate (UFR) for Solvency II purposes.  These highlighted that an impact analysis should be undertaken before any methodology or implementation planning (which should be a part of a wider Solvency II review) is finalised.  Insurance Europe believes that the UFR should remain at its current level until the review of the Solvency II standard formula is complete (as changing the UFR now could cause unintended adverse consequences for policyholders and the wider European economy).

EIOPA to launch EU–wide thematic review on market conduct
On 5 July 2016, EIOPA confirmed that it will be launching an EU-wide thematic review of the market conduct of unit-linked life insurers.  The purpose of the proposed review is to identify potential sources of consumer detriment stemming from relationships between insurance companies and asset management service providers. The review will focus on issues including (a) monetary incentives and remuneration, (b) conflicts of interest, and (c) the process for structuring of unit-linked life insurance products.  EIOPA expects participating entities to report to it by September 2016; and expects to publish results in early 2017.

Insurance Europe updates online consumer focus tool
On 8 July 2016, Insurance Europe updated its online consumer focus tool, which provides helpful information on pro-consumer initiatives underway in EU Member States.  The initiatives captured span a (non-exhaustive) range of areas, including innovative products and services, digitalisation, and initiatives to fight insurance fraud.

EIOPA Q&A on Solvency II regulation
On 19 and 20 July 2016, EIOPA published new sets of questions and answers relating to (a) guidelines on reporting and public disclosure, (b) guidelines on the supervision of branches of third-country insurance undertakings, (c) the final report on the implementing technical standards on reporting to supervisory authorities, (d) guidelines on the valuation of technical provisions and (e) the risk free interest rate.

EIOPA release updated XBRL tool for undertakings
On 8 July 2016, EIOPA announced that it plans to release an updated tool for undertakings related to XBRL reporting (which is required under Solvency II) in October 2016.  This is to be based on the version of the XBRL Taxonomy published on 15 July 2016, capturing certain amendments made to the Solvency II CDR.

EIOPA publishes monthly technical information
On 7 July 2016, 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 June 2016 in both cases.   

Chairman of EIOPA - interview with insurance focuses
On 8 July 2016, EIOPA published an interview given by Gabriel Bernardino to the Newsletter of the German Business Association of Financial Advisers.  Continuing focuses for EIOPA highlighted in the speech included its ongoing work on implementation of the IDD.  This includes (a) its consultations on product governance, conflicts of interest, inducements and suitability and (b) its work on implementing technical standards (ITS) in respect of the standardised insurance product information document (on which EIOPA expects to consult by September 2016).  Despite a European Commission request for consistency (insofar as possible) between the ITS and MiFID II measures, EIOPA emphasises that they should recognise the unique nature of the insurance sector.  

Insurance Europe comments on IAIS paper on increasing access to insurance markets
On 19 July 2016, Insurance Europe released a position paper on the International Association of Insurance Supervisors' (IAIS) Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community Based Organisations in Increasing Access to Insurance Markets.  This welcomed the recognition of such organisations' distinctive role in the insurance sector.  However, it suggested that it may be overly ambitious to attempt to simultaneously (a) address such organisations' roles in enhancing access to insurance markets and (b) set out supervisory approaches for the application of the IAIS's Insurance Core Principles to such organisations.  Insurance Europe recommends that these objectives be examined separately (given that the role of such organisations is not only to provide insurance access in emerging/developing markets but also to participate in well-developed, diverse insurance markets). 

Insurance Europe comments on limitation periods for motor claims
On 12 July 2016, an Insurance Europe representative addressed the European Parliament at a public hearing on differing EU Member State rules regarding limitation periods for motor accident claims.  Difficulties faced by victims of such accidents were identified as (a) limitation periods being too short, and (b) a lack of information on the applicable rules. However, it was noted that such difficulties are relatively rare. Rather than harmonisation of rules on limitation periods (which, it was noted, would be a complex and disproportionate approach), Insurance Ireland stated its preference for ensuring adequate provision of information on limitation periods in Member States.

Feedback statement to EIOPA consumer trends report
On 13 July 2016, EIOPA's Occupational Pensions Stakeholder Group issued a Feedback Statement to EIOPA's Questionnaire on the Consumer Trends Report.  The Feedback Statement addresses trends in relation to pension products.  These include that annuities remain relatively popular (with full or partial lump sum options being the main alternative). The Feedback Statement includes certain EU jurisdiction-specific pension information.  However, no Irish-specific information is included.

Insurance Europe – response to European Commission's services passport consultation
On 25 July 2016, Insurance Europe published a response to the European Commission's services passport consultation.  While welcoming any facilitation of cross-border services, Insurance Europe questions (in particular) how an EU services passport would ensure that local rules regarding service providers' insurance cover obligations are satisfied.  Insurance Europe believes that the most efficient way of achieving that goal is to ensure availability/provision of information regarding professional requirements in each Member State.

Insurance Europe publishes 'European Insurance in Figures'
On 27 July 2016, Insurance Europe published "European Insurance in Figures".  This includes a range of statistics for the European insurance market based on 2014 data. It also provides statistics on the investment portfolios of insurers and the market structure (which includes statistics details on the number of insurance companies in Europe (3,800); as well as the 10 insurance groups having the highest gross written premium.

EIOPA signs up to IAIS MMoU
On 28 July 2016, EIOPA announced that it had become a signatory to the IAIS' multilateral memorandum of understanding (MMoU). The MMoU is a global framework for cooperation and information exchange amongst national insurance supervisors. 

Insurance representative bodies support for insurance inclusion in TTIP
On 6 July 2016, Insurance Europe published a press release regarding the Transatlantic Trade and Investment Partnership (TTIP). This states that support for inclusion of insurance (and other financial services) in the TTIP has been re-affirmed by the American Insurance Association, Insurance Europe and the American Council of Life Insurers. Advantages of the proposed inclusion are noted to include increased US-EU trade and investment, and improved regulatory cooperation.

Insurance Europe – comments on proposed global insurance capital standard
On 19 July 2016, Insurance Europe published a press release on an IAIS consultation on the proposed global insurance capital standard (ICS). Insurance Europe highlighted several issues that need to be addressed. These include (a) an unrealistic proposed timeline for an agreed framework to be ready for adoption in 2019 and for implementation in 2020, (b) the lack of strong political support for the ICS, (c) the need for clarification that local regimes consistent with the ICS framework are a suitable implementation of the ICS, and (d) the need to test any solution regarding the valuation basis during periods of market turbulence.

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

Date published: 04 Aug 2016