Tracker, Financial Services Regulation & Compliance - Insurance


CBI publishes programme of themed inspections in insurance sector

On 3 February 2016, the Central Bank of Ireland (CBI) announced its 2016 programme of themed insurance inspections.  Mirroring Solvency II, risk management and capital planning will be high on the agenda.  For the domestic non-life sector, areas of focus will be policies, procedures and internal controls within claims management and underwriting functions. The CBI plans to increase its inspection of low and low/medium risk firms (including in relation to effectiveness of internal controls for reinsurance and outsourcing arrangements).  Underpinning the programme is a theme of cultural awareness (covering board room dynamics, risk culture and conduct culture).    

CBI report on consumer protection – insurance focuses

On 2 February 2016, the CBI published its Consumer Protection Outlook Report for 2016.  Notably, for insurers, the CBI identified the sale of private health insurance, structured investment products and claims handling (focusing on fairness of claim settlements, particularly for motor insurance) as key priorities for themed inspections in 2016.  The CBI emphasised that changes to business models and cost cutting measures should not negatively impact consumers.  It also indicated a likely increase in the frequency of proactive firm-specific inspections in the retail intermediary sector during 2016.

CBI Director of Insurance Supervision Speech

On 24 February 2016, the CBI's Director of Insurance Supervision delivered a speech (on the activity of the Insurance Directorate) to the Insurance Ireland's Milliman CRO Forum.  Key issues highlighted included (a) redesign of the CBI's engagement model, (b) development of a bespoke model low impact undertakings involving a proportionate amount of pro-active (rather than solely reactive) supervision and (c) that the focus of insurance supervision in 2016 will be on insurance risk (e.g. pricing, and reserving and embedding of risk management). Indications of focuses for the future included emphasis on culture within undertakings (including driving risk management at the senior level) and a likely thematic review of cyber risk.

Updates from CBI on Solvency II reporting templates

During February, the CBI published information on proposed Regulations (currently under consultation with the Minister for Enterprise, Jobs and Innovation) which will impose a statutory obligation on (re)insurers to comply with reporting requirements for the purpose of Solvency II.   New National Specific Templates (NSTs) have also been published which must be used by (re)insurers (a) with a High impact PRISM rating, (b) which transact variable annuity business or (c) which have significant branches passporting into Ireland.  On 10 February 2016, the CBI published technical specification documents for NSTs 3 to 7 (which apply to high impact non-life undertakings and groups).

CBI publishes latest Solvency II Matters Newsletter

Earlier this month, the CBI published its latest Solvency II Matters newsletter.  The final edition of the newsletter will be published in March 2016.  Following this, a quarterly insurance newsletter will be published in its place. Amongst other matters, the newsletter (a) reminds (re)insurers that the in-situ process for the Head of Actuarial role applies only where a person was in that role on/before 31 December 2015, (b) highlights the quantitative template issued (and now available on the website) to assist (re)insurers in producing/reporting the analysis required for 'Day 1' reporting, (c) states that the online reporting (ONR) test environment will be available from 30 March 2016 and (d) contains a Solvency II forward planner and checklist.  The newsletter also points out that the slides presented at the Solvency II reporting workshop held on 23 February are available on the CBI website.


Insurance Distribution Directive published in Official Journal

On 2 February 2016, the Insurance Distribution Directive ((EU) 2016/97) was published in the Official Journal of the EU. The Directive entered into force on 22 February 2016. The deadline for transposition into national law by Member States is 23 February 2018.

Implementing Regulation on calculation of technical provisions and basic own funds published

On 9 February 2016, a Solvency II Implementing Regulation ((EU)2016/165) was published in the Official Journal of the EU and has entered into force.  It sets out implementing technical standards in relating to the calculation of technical provisions and basic own funds for reporting with reference dates from 1 January until 30 March 2016.

EIOPA publishes monthly technical information

On 5 February 2016, European Insurance and Occupational Pensions Authority (EIOPA) published technical information on the relevant risk free interest rate term structures with reference to the end of January 2016. Certain data used in the calculation has been updated to include data for the year 2015.

Council of EU – no objection to equivalence decisions

On 15 February 2016, the Council of the EU published a press release on the outcome of its ECOFIN (European Economic and Financial Affairs Council) meeting of 12 February.  At that meeting, the decision was taken not to object to the European Commission decisions relating to the equivalence of (a) Bermuda's supervisory regime for (re)insurers and (b) Japan's solvency regime for (re)insurers, for Solvency II purposes.  The decisions will now take effect unless the European Parliament raises an objection.

EIOPA update Solvency II reporting format webpage

On 17 February 2016, EIOPA updated its Solvency II reporting format webpage. This includes updates to its list of known issues of taxonomy 2.0.1 and its list of validations (along with the supporting syntax documentation). 

EIOPA publishes 2016 work program

On 16 February 2016, EIOPA published its work programme for 2016.  EIOPA's defined priorities include (a) implementation of Solvency II (in particular, convergence of supervisory practices), (b) whole product life cycle-focussed consumer protection (including thematic reviews), and (d) a pro-active approach to international developments (including working to develop international capital standards). Work on developing/finalising regulatory technical standards and guidance for the packaged retail and insurance-based investment products (PRIIPs) regulation, and sales rules under the Insurance Distribution Directive, will also be a focus.

EIOPA EU wide insurance sector stress test

On 2 February 2016, EIOPA announced that an EU insurance sector stress test will be held in 2016.  National supervisors will identify and contact participants. The stress test is designed to assess the sector's vulnerabilities to a combination of market risk adverse scenarios. Data will be collected in Summer/Autumn 2016.  Results will be published in December 2016.

EIOPA consults on guidelines for supervisor / auditor dialogue

On 3 February 2016, EIOPA published a consultation on proposed guidelines for effective dialogue between insurance supervisors and statutory auditors.  Based on an assessment undertaken by it in conjunction with the European Banking Authority, EIOPA notes that insurance supervisors have regular, ad-hoc contact with statutory auditors even in the absence of formalised rules.  The guidelines seek to ensure a consistent, appropriate and proportionate approach facilitating relevant and efficient dialogue.  Amongst other matters, they describe the proposed nature and form of information to be exchanged. Comments are invited by 28 April 2016.

EIOPA publishes list of insurance groups in supervisory colleges

EIOPA recently published the list of identified insurance groups for which a college of supervisors is in place, as at 30 November 2015. The purpose of the list is to increase transparency and to ensure that non-EEA supervisors are aware of the existence of a college for a particular group. This list includes information on location of head office, subsidiaries and the location of significant branches of each group.

Insurance Europe responds to call for evidence on Capital Markets Union

On 1 February 2016, Insurance Europe published its response to a call for evidence by the European Commission on its proposed Capital Markets Union (CMU).  The CMU aims to remove barriers to investment throughout Europe. The Commission sought feedback on issues such as rules limiting economic growth and imposing unnecessary regulatory burdens. Insurance Europe set out examples of what it views as concerns in this regard, including (a) disincentives to investment such as exaggeration under Solvency II valuation of risks posed by certain asset classes, (b) risk of information overload and duplication (e.g. Solvency II, IDD and PRIIPs and (c) difficulties posed by tight PRIIPs implementation timelines and high implementation costs.

Insurance Europe comments on EIOPA consultation on product oversight & governance

Insurance Europe recently published its comments on the EIOPA consultation on the proposal for guidelines on product oversight and governance arrangements. Insurance Europe urges EIOPA to consider whether guidelines are required in this area, in light of Insurance Distribution Directive delegated acts.  Notably, Insurance Europe (a) views the proposed timing involved as problematic (stating that it will provide a narrow window for insurers and distributors to make adjustments following publication of the finalised guidelines in Q2 2016) and (b) expresses concern as to the potential retroactive application of the proposed guidelines (stating that they should only apply to newly designed products).

EIOPA publishes retail risk indicators methodology report

On 15 February 2016, EIOPA published a Retail Risk Indicators Methodology Report (dated 19 November 2015).  EIOPA's aim is to develop a methodology to identify and monitor potential risks to consumers (i.e. retail risk indicators).  The indicators will complement the existing exchange of consumer protection information between EIOPA and national supervisors.    

European Commission publishes extract from speech on plans to manage risk

On 9 February 2016, the European Commission published an extract from a speech by its Commissioner for Financial Stability, which touched on managing risk in the insurance sector. This stated that the Commission is working closely with the International Association of Insurance Supervisors on how best to manage risk and noted that the Commission is not convinced, at present, that new EU legislation is required in this area.

Insurance Europe response – ESA consultation on draft regulatory technical standards for PRIIPs

On 29 January 2016, Insurance Europe published its response to the European Supervisory Authorities' (ESAs) consultation on draft PRIIPs regulatory technical standards.  Insurance Europe reiterated its concern regarding the neat margin of time (3 to 4 months) available to insurers to implement Key Information Document (KID) requirements.  It also expressed the view that further criteria/guidelines were unnecessary in relation to complex PRIIPS products, as EIOPA was already obliged to develop guidelines under the Insurance Distribution Directive to address such/similar products. 

Insurance Europe responds to IASB materiality proposals for financial statements

On 19 February 2016, Insurance Europe published responses to the International Accounting Standards Board's (IASB) Exposure Draft (ED/2015/8) 'IFRS Practice Statement: Application of Materiality to Financial Statements'.  Insurance Europe commended the IASB for its effort to address the disclosure overload in IFRS financial reports. Other key views highlighted included (a) the importance of a common understanding of materiality amongst stakeholders and (b) that the IASB should await the finalisation of its Principles of Disclosures project before issuing the practice statement.

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

Date published: 02 March 2016