Tracker, Financial Services Regulation & Compliance - Insurance
Central Bank letters concerning life insurance pricing/reserving
On 15 February 2017, the Central Bank of Ireland (CBI) published letters (dated 7 February 2017) issued to (a) chairpersons of Boards, and (b) heads of actuarial function (HoAF) in respect of the CBI's 2016 review of life insurance pricing and reserving assumptions. The letters highlight that ultimate responsibility for oversight and governance of the assumptions rests with the Board and that Boards are expected to request (and HoAFs to provide) sufficient information to enable the Board to challenge key assumptions, judgments and results relating to the experience analysis and assumption setting process. Amongst other matters, the letters set out the CBI's expectations for HOAFs when providing guidance on key assumptions to the Board.
Consumer Insurance Contracts (CIC) Bill 2017
A Bill intended to significantly revise long-established insurance contract principles and impose additional obligations on insurers is making its way through the Oireachtas (Irish Parliament). On 9 February 2017, the CIC Bill 2017 advanced to the second parliamentary stage. The Bill advances many recommendations of the Law Reform Commission made in its report on CICs.
Key features of the Bill include (a) a definition of fraudulent misrepresentation for CICs (b) amendment of consumer's duties of disclosure and restriction of the grounds on which insurers can repudiate CICs (c) prohibition of voiding CICs for innocent and negligent misrepresentation (while introducing alternative proportionate remedies). It further restricts insurers' reliance on insurance warranties, modifies the principal of subrogation and abolishes the concept of "insurable interest" (except in limited circumstances).
Central Bank research on consumer experience in motor claims
On 27 February 2017, the Central Bank published a research paper on motor insurance claims processes following an online consumer survey conducted between January and June 2016. Notably the Central Bank confirmed that the findings will inform Central Bank engagement with industry and policy makers. Key findings included that (a) 74% of claimants agreed the claims process was conducted fairly but (b) a higher claimant overall satisfaction rate applied (75%) when only one claim-handler was involved (by comparison 32% when multiple claims-handlers were involved).
EIOPA publishes translations of guidelines for supervisor/auditor dialogue
On 2 February 2017, the European Insurance and Occupational Pensions Authority (EIOPA) published translations of its guidelines on effective dialogue between insurance supervisors and statutory auditors into all official languages of the EU. The guidelines, which apply from 31 May 2017, seek to ensure a consistent, appropriate and proportionate approach facilitating relevant and efficient dialogue. Publication of the translated guidelines marks the commencement of a two month process during which each European regulator must indicate to EIOPA whether they intend to comply with the guidelines.
EIOPA publishes draft rules regarding the IPID
On 7 February 2017, EIOPA published draft implementing technical standards (ITS) on the format of the insurance product information document (IPID) required under the Insurance Distribution Directive (IDD). Under the IDD, the IPID will need to be produced by manufacturers of non-life insurance products and provided to customers by distributors prior to sale. EIOPA also published its final report on its earlier public consultation concerning the proposed draft ITS. The report includes a feedback statement and summary of comments received. The draft ITS will now be submitted to the European Commission for consideration.
EIOPA updates single programming document for 2017-2019
On 2 February 2017, EIOPA published an update (dated 30 January 2017) to its single programming document for 2017 – 2019. This included its work programme for 2017. Priorities for 2017 continue to include completion of technical advice to the European Commission on Delegated Acts under the IDD (and other IDD deliverables); as well as reviews of the standard formula and long term guarantee measures under Solvency II.
EU Commission speech on insurance sector developments
On 1 February 2017, the European Commission published a speech by the Commissioner for Financial Stability, Financial Services and Capital Markets Union on developments in the insurance sector. Amongst other matters, it was acknowledged that certain areas of Solvency II may require adjustment to improve the framework. Examples offered include (a) the reduced risk calibrations introduced for investments in infrastructure projects (with work nearing completion on risk calibration for infrastructure corporates) and (b) EIOPA's work on simplifying calculation methods to make reporting requirements more proportionate.
EIOPA publishes monthly technical information
On 7 February 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 January 2017 in both cases.
EIPOA consults on Guidelines on complex insurance-based investment products
On 2 February 2017, EIOPA published guidelines on 'complex' Insurance-Based Investment Products (IBIPs) (in short, those that are difficult for the customer to understand). In most case, the IDD requires an assessment of suitability/appropriateness of an IBIP for customers. This can be the subject of a Member State derogation; but only for non-complex IBIPs. The proposed Guidelines address assessment of IBIPs and sets out criteria to identify what is complex in this regard. Comments are invited until 28 April 2017.
ESAs consult on PRIIPs with environmental or social objectives
On 10 February 2017, the European Supervisory Authorities (ESAs) published a consultation on proposals for packaged retail and insurance-based investment products (PRIIPs) having environmental or social objectives (EOS). The consultation paper summaries the current product oversight and governance regime and finds that, in general, this is sufficient for PRIIPS. However, the ESAs believe that additional guidance is required to ensure appropriate interpretation/application of the rules to EOS PRIIPs. Comments are invited until 23 March 2017.
EIOPA advice on delegated acts under IDD
On 1 February 2017, EIOPA published its technical advice to the European Commission on possible delegated acts under the IDD. The advice follows extensive consultation and includes recommendations for proposed rules on the following areas of IDD; (a) product oversight and governance (b) conflicts of interest (c) inducement and (d) suitability and appropriateness.
EIOPA decision on collaboration of insurance supervisory authorities
On 16 February 2017, EIOPA published a decision on collaboration between supervisory authorities under the Solvency II Directive. It replaces the Siena Protocol from 1 May 2017 and addresses communication and cooperation procedures between supervisory authorities in respect of areas including authorisations, cross border operations, portfolio transfers, exchange of information and handling policyholder complaints.
Notably supervisor cooperation will now apply in the areas of (a) the system of governance including risk management systems for the underwriting, pricing and reserving functions (b) outsourcing contracts and distributions partners (c) claims handling (d) compliance and (e) consumer protection.
Insurance Europe briefing on support for innovation in insurance
On 6 February 2017, Insurance Europe (IE) published an insight briefing on supporting innovation and technology in insurance. This emphasises the role of regulators and policymakers in ensuring consumers and industry benefit from innovation. It also highlights the importance of striking a balance between (a) maintaining consumer protection and fair competition and (b) removing regulatory obstacles and encouraging innovation. A number of suggestions are made with a view to increasing innovation. These include future-proofing of legislation and regulator initiatives to support innovation (which should apply equally to new entrants and existing insurers).
IE press release on conservative aspects of Solvency II
On 1 February 2017, IE issued a press release titled "Solvency II one year on: successfully implemented, but excessive conservativeness risks harming consumers, long-term investment and economy". The press release highlights areas of Solvency II which IE considers unduly conservative. Issues identified for attention include (a) capital requirements reflecting the true risks faced by insurers and (b) simplification and application of the proportionality provisions permitted by Solvency II.
IE comments on proposed paper on (Consolidated) Common Corporation Tax Base (C)CCTB
On 20 February 2017, IE published a position paper on European Commission proposals for a Common Corporate Tax Base (CCTB) and a consolidated CCTB (CCCTB). While broadly supportive of the proposals, IE views them as requiring further refinement. From the insurance sector perspective, IE makes recommendations with a view to achieving uniform application. These include incorporating the Insurance Accounts Directive (Directive 91/674/EEC) method for valuation of technical provisions. IE also suggests that aspects of the proposed (C)CCTB regime concerning the tax treatment of equalisation provisions needs further adjustment.
For further information please contact a member of the Financial Regulation team.
Date published: 03 Mar 2017