Tracker, Financial Services Regulation & Compliance - Insurance


Solvency II transposed into Irish law

On 4 November 2015, the Minister for Finance signed the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. 485 of 2015) which transpose the Solvency II Directive into Irish law. The majority of the Regulations come into operation on 1 January 2016, with a number of provisions already commenced as necessary to comply with the phasing-in provisions of the Directive.

Central Bank publishes proposed requirements on Domestic Actuarial Regime and Head of Actuarial Function

On 20 November 2015, the Central Bank of Ireland (CBI) published draft 'Domestic Actuarial Regime' requirements under Solvency II. This sets out information on the pre-approval process for appointment of a Head of Actuarial Function; and details regarding the actuarial opinions, reports and policy required by law/regulation.  On 9 November 2015, the CBI published a letter regarding the information to be provided to it concerning persons acting as Head of Actuarial Function on or before 31 December 2015 (also describing how an undertaking should satisfy itself that such persons have the necessary skills/qualification to fulfil the role).

Central Bank publishes Corporate Governance Code for Insurance Undertakings

On 27 November 2015, the CBI published a revised and renamed version of the Corporate Governance Code 2013 for insurers only, entitled 'Corporate Governance Requirements for Insurance Undertakings 2015' (CGR), which will apply from 1 January 2015.  Legislative references in the CGR have been updated to include the European Union (Insurance and Reinsurance) Regulations 2015, implementing the Solvency II Directive. There have been no changes made to the substantive requirements contained in the CGR.

CBI Policy Notice on Ring Fenced Funds under Solvency II

On 17 November 2015, the CBI published Policy Notice (outlining the Central Bank's expectations, as well as guidance on criteria to be considered) in relation to the assessment of arrangements which may be subject to a ring fenced fund (RFF) classification under Solvency II.   The CBI highlights that undertakings should be mindful that certain reinsurance arrangements may result in a RFF classification.

Exclusion from Solvency II requirements – notification templates

On 26 November 2015, the CBI published templates to be used when notifying it of satisfying criteria for exclusion from certain Solvency II requirements (i.e. on the basis of size and for undertakings in run-off). Notifications should be submitted by 14 December 2015.

CBI - Solvency II Newsletter and Information Note

The November edition of the CBI's Solvency II Matters Newsletter has been published.  Amongst other matters, the CBI (a) reiterates that it will release a draft set of conditions of authorisation to firms (allowing 21 days for comment) and (b) confirms that it would publish a working draft of the XBRL taxonomy for National Specific Templates on its website on 30 November 2015 (final version to follow).  On 11 November 2015, the CBI released its Solvency II Information Note 8 confirming its intention to comply with EIOPA's Set 2 Guidelines (with which the CBI expects (re)insurers to comply).

Gill Russell v HSE - Court of Appeal Judgment

On 5 November 2015, the Irish Court of Appeal issued its judgment in the case of Gill Russell v HSE (2015/49). The decision related to the real rate of return (RRR) or 'discount rate' (an assumed investment return rate) applied to the lump sum damages in catastrophic injury cases; which had been set at 3% since 2003.  The Court of Appeal affirmed the High Court's decision to reduce the RRR applied to between 1% and 1.5%. Insurers can now expect to pay out higher lump sum damages in a wide range of injury, medical negligence and loss of earnings cases.

CBI releases results of Bodily Injuries Thematic Review

On 24 November 2015, the CBI published the results of its Bodily Injuries Thematic Review.  Key issues identified include (a) growing numbers and cost of bodily injury claims in the non-life insurance sector between 2012 and 2014 and (b) some insurance companies had not increased reserves to reflect this. On 25 November 2015, Insurance Ireland welcomed the report and called for (a) reasonable compensation which society can afford, (b) flaws in the Injuries Board process to be addressed and (c) more stringent sanctions to deter fraud.

CBI – Address by Director of Insurance Supervision

On 18 November 2015, the CBI Director of Insurance Supervision, Sylvia Cronin, spoke on culture and governance at the Institute and Faculty of Actuaries' life assurance conference.   Key points highlighted include that (a) business success begins in the Boardroom, by ensuring appropriate Boardroom dynamics, governance structures, culture and behaviours ad (b) identifying core customer needs and delivering better quality consumer outcomes should lead to a more sustainable level of shareholder return.

CBI announces website review and update

In a letter dated 27 November 2015, the CBI announced that it will be updating the section of its website relating to (re)insurance undertakings, in light of the transitional period for Solvency II.   The letter indicates that existing guidance, requirements and letters to industry contained on the website section will be classified (per the Schedule) depending upon whether changes, revocations or further review is required to ensure compatibility with Solvency II.  Notably, the CBI will publish revised versions of some documents (e.g. its Acquiring Transaction Notification Form) and will revoke others (e.g. some documents applicable to reinsurers).

CBI publishes additional information on statistical reporting

The CBI has published a number of explanatory documents with respect to the recently released national specific templates (NSTs) to cater for new European Central Bank (ECB) statistical reporting requirements. These NSTs will allow the CBI to gather the additional information it needs (i.e. beyond that contained in Solvency II NSTs) in order to comply with ECB requirements. The documents published include a Q&A explaining the purpose/applicability of the returns, as well as notes to assist undertakings with completion.


EU Implementing Regulations for Solvency II published

On 12 November 2015, Solvency II Implementing Regulations recently adopted by the European Commission were published in the Official Journal of the EU.  These set out implementing technical standards on matters including (a) procedures for decisions to set, calculate and remove capital add-ons, (b) procedures and templates for the submission of information to the group supervisor and (c) procedures for assessing external credit assessments. The Regulations will enter into force on 02 December 2015.

European Parliament adopts IDD

On 24 November 2015, the European Parliament voted to adopt the Insurance Distribution Directive (IDD) and published the provision text of the adopted Directive. The text has not been significantly amended since the publication of a final compromise proposal on 17 July 2015.  The IDD will now be submitted to the Council for final adoption and will come into force 20 days after publication in the Official Journal.  Member States will have 24 months to transpose the IDD from the date of the IDD's entry into force.

European Commission adopts equivalence decisions for Bermuda and Japan

On 26 November 2015, the European Commission adopted and published Delegated Decisions regarding the equivalence of Bermuda and Japan.  Except for captives and special purpose insurers, the Commission considers the Bermudan regimes regarding (a) reinsurance, (b) insurance activities and (c) prudential supervision of groups, fully equivalent for Solvency II purposes.  In relation to Japan, temporary equivalence has been granted for reinsurance activities (until the end of 2020) and provisional equivalence in respect insurance activities (for ten years from 1 January 2016).  The decisions apply from 1 January 2016.

Corrigendum to Solvency II Delegated Regulation

On 25 November 2015, the Official Journal of the EU published a Corrigendum to the Solvency II Commission Delegated Regulation ((EU) 2015/35) (CDR). The Corrigendum corrects five minor typographical errors in the text of the CDR.

EIOPA final report on draft ITS on equity transitional 

On 6 November 2015, the European Insurance and Occupational Pensions Authority (EIOPA) published a final report (dated 30 October 2015) on its consultation on implementing technical standards (ITS) regarding application of the equity transitional (i.e. the transitional measure for the calculation of the equity risk sub-module).  Amongst other matters, this provides guidance on such application where undertakings calculate their solvency capital requirement in accordance with the standard formula.  The Report will be submitted to European Commission for consideration.

EIOPA calls for evidence on treatment of infrastructure corporates

On 19 November 2015, EIOPA published a call for information from stakeholders on the treatment of infrastructure corporates under Solvency II.  It is seeking this information to inform its advice to the European Commission (on inclusion of non-SPV infrastructure corporates in the infrastructure risk class which will benefit from favourable treatment in the context of capital charges). Responses are invited by 10 December 2015.

IAIS publishes public consultation document on the updated assessment methodology for GSIIs

On 25 November 2015, the International Association of Insurance Supervisors (IAIS) published a public consultation document proposing updates to its assessment methodology for identifying global systemically important insurers (GSIIs). The changes in this new methodology reflect the improvements and refinements learned from applying the current methodology and examining data received from GSIIs over a three year period. Comments are invited until 25 January 2016.

EIOPA consults on revised product oversight and governance guidelines

On the 30 October 2015, EIOPA launched a consultation on revised proposals for guidelines (for supervisors) on product oversight and governance arrangements by insurers and insurance distributors in the lead-up to transposition of the IDD. Separate guidelines are proposed for insurers/intermediaries that manufacture insurance products for sale and distributors who advise on/propose products which they do not manufacture.  Comments are invited until 29 January 2016. 

FSB list of G-SII's for 2015 updated 

On 3 November 2015, the Financial Stability Board (FSB) published its list of G-SIIs for 2015. The FSB updated this list using end-2014 data and the updated assessment methodology published by the IAIS. One insurer has been added to, and one removed from, the list.

FSB consults on effective resolution for systemically important insurers

On 3 November 2015, the FSB published a consultation document containing guidance for supervisors on development of effective resolution strategies and plans for systemically important insurers (SIIs). The FSB emphasised that while this guidance focuses primarily on G-SIIs, many aspects may also be relevant to SIIs identified by supervisors.  Comments are invited until 4 January 2016.

IAIS consults on non-traditional non-insurance activities/products

On 25 November 2015, the IAIS published a consultation on a proposed analytical framework to be used to gain a better understanding of the concept of non-traditional non-insurance activities and products.  Its aim includes assessment of how the characteristics of such products/activities drive their systemic relevance. Comments are invited until 25 January 2016.

Insurance Europe position paper - European Commission securitisation proposals 

On 16 November 2015, Insurance Europe published a position paper outlining its key views on the European Commission's proposal for a framework for simple, transparent and standardised (STS) securitisation. This states that elements of the proposals require further consideration, including that the scope of the review of Solvency II capital requirements should cover all tranches of STS securitisations (not just junior elements).

EIOPA technical updates

On 9 November 2015, EIOPA published technical information on (a) the relevant risk free interest rate term structures to be applied by (re)insurers and (b) the symmetric adjustment of the equity capital charge for Solvency II, with reference to the end of October.

European Commission speech at EIOPA Annual Conference

A speech delivered by a Director-General of the European Commission on 18 November 2015 at EIOPA's Annual Conference has recently been published.  Notably, in relation to equivalence of non-EU countries under Solvency II, this highlighted that supervisors should not actively treat non-EU countries as non-equivalent if there is a positive Commission equivalence decision (pending European Parliament or Council scrutiny).

EIOPA publishes speech delivered on supervisory convergence

On 26 November 2015, EIOPA published a speech delivered by its Chairman on supervisory convergence and cooperation between EIOPA and national supervisors.  Interestingly, this indicates that as part of the support EIOPA will continue to offer to supervisors, a supervisory handbook on areas of Solvency II will be produced.

EU/U.S. Insurance Project - ORSA Report and 2015 overview published

On 22 November 2015, the Steering Committee of the EU-U.S. Insurance Project received a report titled 'Key Elements of Regulations and Supervisory Practices in Respect of Group ORSA'. The report was compiled through exchange of information by the EU and the U.S. concerning the requirements and use of own risk and solvency assessment reports. The Report identifies similarities in that regard (e.g. the nature/purpose of the process, and the relationship between it and the risk management framework of the group).  An overview of the Steering Committee's 2015 activities was also published.

IAIS publishes AGM Press Release and Newsletter

On 12 November 2015, the IAIS announced conclusion of its 2015 annual general meeting, at which it adopted a range of material.  This includes revisions to the Insurance Core Principals, an Application Paper on captive insurers and Issues Papers on conduct of business risk and inclusive insurance.  Key points of focus in the IAIS' November Newsletter include a member survey on disclosure of brokers' remuneration in auto insurance.  

Report shows variance in cost of motor claims across EU

On 4 November 2015, Insurance Europe released a report outlining variations in the cost of motor insurance claims across Europe.  It indicates that this inconsistency is a product of the unique regulatory, risk and economic environments which exist (including costs of medical treatment, compensation practices and road habits). These factors also lead to a wide variation in premium.  In light of these differences, Insurance Europe considers that the EU Motor Insurance Directive provides appropriate levels of harmonisation within the sector. 

FCA Consultation Paper on PPI

On 26 November 2015, the Financial Conduct Authority in the UK (the FCA) published a consultation on proposed changes concerning payment protection insurance (PPI) complaint handling rules. The proposals include (a) introduction of a deadline for consumers to submit PPI complaints and (b) a new fee payable by firms who have reported the majority of complaints. Rules are also proposed to bring certainty to PPI complaints handling in light of the decision in Plevin v Paragon Personal Finance Ltd [2014] 1 W.L.R. 4222;  which held that failure to disclose large commissions payable out of a consumers premium was a breach of UK consumer law. Comments are requested by 26 February 2016.

FCA calls for input on big data in retail general insurance

On 24 November 2015, the FCA published a call for information in relation to 'big data' in retail general insurance. The FCA wishes to have a better understanding of how the use of big data by insurance firms has developed in recent years and how this might change in the future. The request focuses on the impact of big data on consumer outcomes and competition; and whether the FCA's regulatory framework affects developments in Big Data (e.g. by unduly constraining innovation).  Comments are invited until 8 January 2016.

ESA Chairpersons attend ECON hearing

On 17 November 2015, the European Parliament's Economic and Monetary Affairs Committee held a hearing of the Chairs of the Joint Committee of European Supervisory Authorities (ESAs).  Notably, EIOPA outlined its three main strategic priorities for the insurance sector as (a) enhancing supervisory convergence (including the move to a risk-based regime under Solvency II), (b) reinforcing preventative consumer protection (including under the IDD) and (c) preserving financial stability (building on harmonised reporting under Solvency II).

Publications on retakaful and microtakaful

On 5 November 2015, the Islamic Financial Services Board (IFSB) published a consultation on proposed guidance to supervisors on retakaful (explaining its basic concepts and guiding principles).  This aims to assist supervisors in providing rules and guidance to entities engaging in retakaful. Comments are invited until 4 January 2016.  On 18 November 2015, the IAIS and IFSB published a joint issues paper on microtakaful.  Amongst other matters, this identifies practices/models used for offering such products and challenges and potential issues arising from this.

PRA Solvency II publications

On 30 October 2015, the UK Prudential Regulation Authority (PRA) published two Solvency II-related supervisory statements.  These were statements (a) setting out its approach to the ITS on supervisory reporting and public disclosure and (b) on EIOPA's Set 2, System of Governance and Own Risk Solvency Assessment Guidelines. On 2 November 2015, the PRA released the H2 2015 stress scenario for firms as a form of guidance in constructing their own scenarios for Pillar 2 capital planning stress testing.  On 3 November 2015, a speech delivered by the PRA relating to Solvency II implementation issues was published.   On 20 November 2015, the PRA published a consultation paper setting out its policy proposal in relation to the Solvency and Financial Condition Report required under Solvency II.  Responses are invited until 19 February 2016.

PRA supervisory statement on capital assessments of non-Solvency II insurers

On 20 November 2015, the PRA published a supervisory statement (SS43/15) on capital assessments for insurance firms not subject to Solvency II.  This sets out rules on how such a firm should conduct its capital assessments. Points addressed include (a) the purpose of such assessments, (b) general assumptions regarding such assessments, (c) stress testing and scenario analysis and (d) management actions.  

ICS for Insurers – Bank of England speech

A speech on international capital standard (ICS) for insurers, delivered (on 5 November 2015) by a Director of the Bank of England's Financial Policy Department, has recently been published.  This pointed to a continuing trend towards internationalisation for insurance firms (more than is evident in banking sector). The speech describes the ICS as key for a robust international regulatory framework to protect policyholders.

Updates on UK SIMR rules for non-Solvency II firms

On 20 November 2015, the PRA published policy statement (PS26/15) containing final rules on implementation of the senior insurance managers regime (SIMR) for insurance firms not captured by Solvency II.  This also contains feedback on responses received to consultations on the introduction of SIMR.  The PRA and FCA have also published a joint consultation on an interim SIMR regime for branches of Swiss general insurers.

Solvency II directors’ update letter published in the UK

On 6 November 2015, the PRA published a directors’ update letter in relation to Solvency II.  Notably, the PRA had indicated its intention to review equity release mortgage valuations and capital treatment in 2016. The letter also sets out the PRA’s expectations in relation to the management/mitigation of reinsurance counterparty default risk, as well as the results of a recent review of firms’ risk margin methodologies.

PRA consults on capital extractions by run-off firms

On 20 November 2015, the PRA published a consultation paper (CP42/15) on capital extractions by general insurance sector firms in run-off. The PRA proposes a supervisory statement setting out its expectations where an insurer makes a request to extract capital.  Comments are invited until 20 January 2016.

PRA supervisory statement on UK 'third country' branches

On 27 November 2015, the PRA published a supervisory statement (SS44/15) addressed to non-EEA (re)insurers with a UK branch (but not Swiss general insurers).  Amongst other matters, this highlights the importance of maintaining financial soundness at branch level and the calculation of branch own funds, to ensure that branch policyholders as protected in the same way as those of an EU (re)insurer.

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

Date published: 03 December 2015