Tracker, Financial Services Regulation & Compliance - Insurance
Central Bank publishes Macro-Financial Review
On 14 June 2017, the Central Bank (CBI) published the first half of its Macro-Financial Review for 2017 (the Review). The Review notes that the outlook for the non-life sector is improving with firms focussed on the domestic market recording lower underwriting losses in 2016 compared to 2015 (some firms reported a profit). The Review also notes that the outlook is broadly positive for the domestic life sector. Aggregate premium income in that sector increased by 1.7% in 2016 although performance varied across business lines (for example, pension sales experienced a spike in growth whereas premium income from protection business continued to decline).
Central Bank publishes Insurance Quarterly Newsletter
The CBI published the latest version of its Insurance Quarterly newsletter at the end of June. Matters covered include the CBI's approach to authorisations in the context of Brexit; the impact of Brexit on the domestic insurance market; findings from the CBI's recent operational risk inspections (see also below) and the CBI's early observations on Solvency II Annual Reporting. In respect of the latter, it notes the CBI is in the process of flagging queries on Annual QRTs and identifies a number of examples of the kinds of issues arising, including incomplete cross-border information and discrepancies in technical provisions. It also sets out high level details of the CBI's approach to assessing the Regular Supervisory Report and Solvency and Financial Condition Report.
Central Bank publishes 'Dear CRO' letter on Operational Risk Management
On 28 June 2017, the CBI published a 'Dear CRO' letter following a number of recent on-site inspections focussing on the area of operational risk management (ORM) in the insurance industry. The letter notes the objective of the inspections of a number of insurance undertakings was to assess the design, implementation and operating effectiveness of the ORM framework as a sub-set of the Risk Management Framework (RMF), with a particular focus on governance structure and risk identification, measurement, monitoring and reporting processes. The letter includes a number of examples of both good and poor practices observed in the areas assessed.
Insurance Europe responds to European FinTech Consultation
On 15 June 2017, Insurance Europe (IE) published its response to the European Commission's public consultation on FinTech. The consultation covers key FinTech topics including, for example, automated financial advice; data analytics; cloud solutions; block chain; outsourcing; data protection; cybersecurity. In its response, IE emphasises that the best way to support FinTech from a policy perspective is to ensure that the regulatory framework is activity-based, technologically neutral and future-proofed.
Insurance Europe publishes speech to European Parliament on European Services e-Card
On 22 June 2017, IE published a speech given to the European Parliament by its head of Personal Insurance, General Insurance & Macro-economics in relation to the European Commission's proposed European Services e-card. In his speech, Mr Nicolas Jeanmart disagrees with the Commission's view that insurance is a barrier to cross-border service provision in Europe. He also expresses concern that measures in the proposals targeted at the insurance sector will be complex and costly to implement, with limited positive impact on access to cross-border services.
Insurance Europe comments on proposed Pan-European Personal Pension Product
On 19 June 2017, IE published a briefing on proposals for a Pan-European Personal Pension Product (PEPP). IE welcomes the proposals as a way of increasing the number of European citizens who have private pensions. However, IE emphasises that the PEPP must be structured as a truly long-term product in order to achieve that goal. In particular, consumers should be incentivised to save over the long term through minimum investment periods and tax incentives, for example.
Insurance Europe publishes proposals on Equity Risk under Solvency II
On 30 May 2017, IE published a paper proposing revisions to the equity risk sub-module. According to IE, capital requirements for long-term investments under Solvency II are inappropriate and do not reflect the investment activities of insurers or the long-term nature of insurance business. IE acknowledges that any change would require further review but suggests, as a first step, that the equity risk sub-module be amended by: (a) adjusting requirements for strategic participations (including by lowering the required participation to 10%); and (b) allowing for alternative treatment of long-term investment strategies.
European Insurance And Occupational Pensions Authority Publishes Annual report for 2016
The European Insurance and Occupational Pensions Authority (EIOPA) has published its annual report for 2016 (the Report). The Report provides an overview of the activities undertaken by EIOPA in 2016 in the context of its strategic objectives for that year. The Report notes that EIOPA will continue to prioritise supervisory convergence in 2017 as well as playing a role in advancing the European Commission's agenda in areas such as the Capital Markets Union. The Report also notes that EIOPA is ready to respond to the evolving political and business environment, increased digitalisation and the use of big data.
European Insurance and Occupational Pensions Authority enters into Memorandum of Understanding with the World Bank
On 15 June 2017, EIOPA signed a new Memorandum of Understanding with the World Bank (MoU) with a focus on insurance. The MoU sets out how the two organisations intend to collaborate to achieve their common objectives which include: promoting a more risk-based regulatory and supervisory framework; fostering efficient and effective supervision; promoting consumer protection, financial literacy and education initiatives; contributing to financial stability and the identification of systemic risk.
European Insurance and Occupational Pensions Authority Chairman delivers speech on Opportunities, Challenges and Regulatory Developments
EIOPA has published a speech delivered by its Chairman, Mr. Gabriel Bernardino, to the Goldman Sachs Annual European Financials Conference held in Madrid on 8 June 2017. The speech covers the following insurance topics: EIOPA's approach towards consistent supervisory practices and a common supervisory culture to ensure a level playing field throughout Europe; developing a successful industry in a challenging environment (in this regard, EIOPA expects insurers to promote a strong risk culture, develop and a consumer-centric approach, embrace the digital era and use Solvency II public disclosures as an opportunity to enhance transparency); developing international capital standards; and Brexit.
European Insurance and Occupational Pensions Authority publishes Solvency II Statistics
On 28 June 2017, EIOPA published its first set of comprehensive statistical information on the EU insurance sector based on Solvency II reporting. The statistics, which will be published on a quarterly basis, report aggregated country level information (including balance sheet, own funds, premiums, claims and expenses). Notably, the statistics for solo undertakings show that Ireland had the eighth highest gross written premium for non-life business and that Irish insurers had an average 165% solvency capital requirement ratio.
European Insurance and Occupational Pensions Authority publishes supervisory assessment of the Own Risk and Solvency Assessment
On 19 June 2017, EIOPA published a report on the implementation by (re)insurers of the Own Risk and Solvency Assessment (ORSA) requirements. Key findings in the report include: (a) good progress has been made by the majority of (re)insurers in implementing ORSA processes; (b) there is a need for greater Board involvement in the ORSA process; and (c) the quality of stress testing needs to be improved.
European Insurance and Occupational Pensions Authority publishes Monthly Technical Information
On 8 June 2017, EIOPA published technical information on (a) the symmetric adjustment of the equity capital charge and (b) the relevant risk free interest rate term structures for Solvency II purposes; in with reference to the end of May 2017 in each case.
European Insurance and Occupational Pensions Authority invites comments on updated Solvency II XBRL Taxonomy
On 7 June 2017, EIOPA issued a press release inviting comments on its recent draft version 2.2.0 of the Solvency II Data Point Model and XBRL Taxonomy (to be used for reporting with reference dates from 31 December 2017). The final version is expected to be released by mid-July 2017. EIOPA also updated the list of validations and list of known issues for the 2.1.0 version of the XBRL Taxonomy.
European Insurance and Occupational Pensions Authority publishes Financial Stability Report
On 20 June 2017, EIOPA published its Financial Stability Report for the (re)insurance and occupational pensions sectors. The report highlights the continuing fragility of the macroeconomic environment although signs of improvement are noted. Amongst other matters, the report highlights: (a) the emerging risk of cyber-attacks and the increasing frequency of terrorism; (b) that the majority of solo insurers reported a solvency capital requirement ratio above 100% (with a median ratio of 209%) as at December 2016; and (c) that the low interest rate environment is the main concern among national supervisors.
Commission proposes changes to capital requirements for certain categories of assets
On 8 June 2017, the European Commission published the text of its proposed amendments to Commission Delegated Regulation (EU) 2015/35. The proposed changes seek to introduce technical rules concerning the treatment of infrastructure corporates (legal entities that engage in infrastructure activities) as investments for Solvency II (re)insurers. The changes aim to improve a number of perceived deficiencies in the existing Solvency II regime in respect of those types of investments.
For further information please contact a member of the Financial Regulation team.
Date published: 07 July 2017