Tracker, Financial Services Regulation & Compliance - Insurance
Supreme Court reaches decision in Law Society of Ireland v The Motor Insurers’ Bureau of Ireland
On 25 May 2017, the Supreme Court overturned the High Court and Court of Appeal judgments in the case of The Law Society of Ireland v The Motor Insurers’ Bureau of Ireland (MIBI). In March 2016, the Court of Appeal upheld the High Court's ruling that the MIBI was liable to pay out in respect of claims against persons who were insured with an insolvent insurer at the time of its entry into liquidation. The MIBI appealed that decision to the Supreme Court; which concluded that the MIBI agreements should not be interpreted as requiring the MIBI to discharge third party liabilities where an insurer is insolvent. On that basis, the Supreme Court agreed with the MIBI that it was not obliged to cover claims against policyholders of such insurers.
Cost of Insurance Working Group publishes First Quarterly Progress Report
On 3 May 2017, the Cost of Insurance Working Group published its first quarterly progress report. This tracks progress on the action plan arising from its report on the cost of motor insurance. It notes that a number of the objectives set for completion in Q1 2017 have been met. Remaining objectives for that Quarter are due to be completed shortly. Details on the status of each of the 33 recommendations of the Working Group are included. Amongst other matters, it notes that (a) the Personal Injuries Commission (which will examine awards and settlement systems in other jurisdictions, and other matters) was established in January, and (b) initial steps towards establishing a national claims database have been completed.
Central Bank publishes Notice on reporting under Solvency II
The Central Bank of Ireland published an update (May 2017) to its policy notice on submission of information under Solvency II, replacing its previous October 2015 notice. This sets out requirements and guidance in relation to certain Central Bank discretions/options available under Solvency II. Notably, the existing exemption for certain low and medium-low impact (re)insurers from reporting particular templates has been removed with effect from 1 January 2017. Other confirmations include that (re)insurers should continue to use the same currency (for reporting and templates) and exchange rates (for regular supervisory reporting) as those used in their financial statements.
CBI publishes Annual Performance Statement – Insurance Focuses
On 3 May 2017, the CBI published its Annual Performance Statement for Financial Regulation 2016-2017. Amongst other matters, this notes that the transition to Solvency II included reviewing PRISM engagement to ensure proportionate interaction with (re)insurers relative to their impact and risk profile, development of Targeted Risk Assessments (TRAs), realignment of risk categories to Solvency II and enhanced regulatory engagement for low impact firms. Insurance supervision priorities for 2017 include (a) review of the stresses/scenarios in the ORSA process to ensure (re)insurers are giving sufficient attention to stress testing, (b) continuing to embed Solvency II reporting, and (c) increased oversight of branches through on-site visits.
Insurance Ireland calls for regulatory grandfathering of UK insurers relocating to Ireland
On 4 May 2017, Insurance Ireland (II) issued a press release calling for 'regulatory grandfathering' of UK insurers seeking to invest in Ireland post-Brexit. According to the II, this would give insurers regulated by the UK's Prudential Regulation Authority (PRA) credit in the CBI's authorisation process by recognising the insurer's track record in a comparable regulatory jurisdiction. The II also encouraged the establishment of a joint grandfathering agreement between the PRA and CBI to allow for fast-track approval of Irish insurers seeking todo business in the UK.
European Insurance and Occupational Pensions Authority updates Risk Dashboard
On 16 May 2017, the European Insurance and Occupational Pensions Authority (EIOPA) published its updated risk dashboard, based on data provided by certain insurers and insurance groups for Q4 2016. This indicates that risks for the insurance sector remained stable during Q4 with some improvements being observed. Points highlighted include (a) a strong improvement for solvency ratios in life and non-life from increased eligible own funds, and (b) that the enduring low-yield environment remains fragile for the insurance sector.
European Insurance and Occupational Pensions Authority publishes its final report on UFR methodology
On 23 May 2017, EIOPA published its Final Report (dated 17 May 2017) on its consultation on the methodology to derive the Ultimate Forward Rate (UFR) and its implementation. The UFR is used to calculate the risk-free interest rate term structures for Solvency II. This follows EIOPA's publication of the methodology for calculation of the UFR last month. The Report includes a feedback statement, the UFR methodology, results of EIOPA's information request to (re)insurers on the impact of UFR changes, and a resolution table reflecting all stakeholder comments.
Solvency II Implementing Regulation – calculation of technical provisions & basic own funds
On 15 May 2017, the European Commission adopted an Implementing Regulation (EU/2017/812) on the calculation of technical provisions and basic own funds for the purpose of Solvency II reporting (with reference dates from 31 March 2017 until 29 June 2017). The Implementing Regulation was published by the European Commission in the Official Journal of EU on 18 May 2017 and it entered into force the following day.
European Insurance and Occupational Pensions Authority publishes monthly technical information
On 8 May 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 April 2017 in both cases.
Insurance Europe publishes Annual Report and review of indirect taxation on insurance contracts
Insurance Europe (IE) has published its Annual Report for 2016 – 2017. This summarises IE's position on a range of insurance issues affecting the industry. On 17 May 2017, IE also published its annual review of indirect taxation on insurance contracts which provides a useful overview of the taxes that apply to insurance premiums, declarations and payment procedures across Europe.
Insurance Europe position paper on liability insurance and emerging technologies
On 3 May 2017, IE published a position paper on liability insurance and emerging technologies. This follows on from IE's contributions to European Commission consultations on the European Data Economy and the review of the Product Liability Directive (PLD) (each of which are relevant to product liability for new technologies). In particular, IE expresses its views that existing liability regimes are adequate, covering the needs of consumers and producers; and that the PLD provides adequate compensation for potential risks from emerging technologies (balancing consumer protection while encouraging advancement in product development).
Insurance Europe responds to Commission consultation on ESAs
On 16 May 2017, IE published a position paper responding to the European Commission's consultation on the operations of the European Supervisory Authorities (ESAs). The paper focuses mainly on the work of EIOPA; noting that EIOPA has made a positive contribution to supervisory convergence; and has sufficient powers / tools at its disposal to achieve its objectives. However, EI also expresses its view that improvements are needed in EIOPA's governance structure to enable it to effectively fulfil (while not exceeding) its mandate. IE believes that EIOPA should remain a stand-alone body and expresses concerns about proposals to (a) move its consumer protection function to the European Securities and Markets Authority and (b) merge its remaining functions with the European Banking Authority.
European Insurance and Occupational Pensions Authority Chairman comments on Brexit relocations
On 30 May 2017, EIOPA published an interview given by its Chairman to Insurance Asset Management Europe. The interview covered a range of insurance topics; from supervisory convergence to the UFR and the SCR for real estate investments. His comments on Brexit are of particular note. These include that EIOPA's oversight team is visiting national supervisors engaged in discussions with UK firms seeking to relocate to other European countries in the wake of Brexit. He emphasised that sound supervision demands appropriate location of management and key functions, and that relocations without substance are not acceptable. He also confirmed that EIOPA intends to publish guidance for national supervisors on sound principles for authorisation and supervision and will monitor their implementation across Europe.
Insurance Europe concerned by Anti-Money Laundering proposals
On 23 May 2017, IE published a position paper expressing its concern in relation to a number of amendments proposed by the European Parliament to the Fourth Anti-Money Laundering Directive (Fourth AML Directive). The paper emphasises that AML risks are considered low in the life sector, particularly as regards products without a savings or investment element such as pure protection products. IE has therefore called on the European institutions not to dilute the risk based approach to AML in the Fourth AML Directive in that regard. IE also expresses particular concern in the paper in relation to the creation of national AML registers which it believes would impose a significant burden on insurers with little or no added value. IE is also critical of proposals to oblige insurers to contact customers to review details in relation to beneficial ownership within one year of the Fourth AML Directive entering into force.
For further information please contact a member of the Financial Regulation team.
Date published: 08 June 2017