Financial Services Regulation & Compliance - Insurance Nov 2017
Central Bank consults on approach to third-country branches
The Central Bank of Ireland has published a consultation paper on its proposed approach to the authorisation and supervision of branches of third-country insurers. The paper includes:
- a policy statement
- a handbook of requirements providing a supervisory framework for third-country branches
- an addendum to the Domestic Actuarial Regime which the Central Bank proposes applying to third-country branches
- draft guidance and a checklist for completing and submitting third-country branch authorisation applications
In its policy statement, the Central Bank explains that its overarching approach to third-country branches is to ensure that policyholders are provided with the same level of protection as they would have with an EEA-authorised insurer. Feedback on the paper is requested by 5 February 2017.
Central Bank publishes information note on major changes to internal models
The Central Bank has published a new Solvency II information note which sets out its approach and expectations in relation to applications seeking approval for major changes (which may include an accumulation of minor changes) to approved internal models and extensions of scope (e.g. to cover new risks). According to the note, the Central Bank’s approach will be similar to the internal model approval process and that the informal pre-application phase will be used whenever possible. Insurers are reminded to engage as early as possible in relation to planned changes.
Central Bank proposes new insurance renewal requirements
On 9 November 2017, the Central Bank published a consultation paper proposing amendments to the Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) Regulations 2007. The proposed amendments are based on recommendations from the Cost of Insurance Working Group and include:
- increasing the notice period for renewal notifications from 15 to 20 working days
- requiring a breakdown of premium cost for motor insurance
Submissions on the consultation are invited before 9 February 2018.
Civil Liability (Amendment) Act 2017 signed into law
On 22 November 2017, the President signed the Civil Liability (Amendment) Act 2017 into law (the Act). Among other matters, the new Act will permit the courts to make periodic payment orders as an alternative to lump sum awards in cases of catastrophic injury. It is expected that the Act will be commenced shortly by the Minister for Justice and Equality.
Update on the Insurance Distribution Directive
On 16 November 2017, the European Parliament Committee on Economic and Monetary Affairs published a letter to the European Commission repeating its call to postpone the application of the Insurance Distribution Directive (IDD) to 1 October 2018. In the meantime, it has been reported that the Council of the European Union has decided not to object to the two Commission Delegated Regulations supplementing the IDD in the areas of:
- information and conduct of business requirements for insurance-based investment products (C2017/6229)
- product oversight and governance (C2017/6218).
The two Delegated Regulations will enter into force 20 days after their publication in the Official Journal of the European Union.
European Commission adopts new Solvency II Implementing Regulations
On 9 November 2017, the European Commission adopted a new Implementing Regulation (EU/2017/2015) on the calculation of technical provisions and basic own funds for the purpose of Solvency II reporting with reference dates from 30 September 2017 until 31 December 2017. On 25 November, the European Commission adopted two further Implementing Regulations amending and correcting previous measures laying down technical standards with regard to:
- the templates for the submission of information to supervisory authorities under Solvency II (EU2017/2189)
- the procedures, formats and templates of the solvency and financial condition report (EU2017/2190)
EU / US bilateral agreement provisionally applied
On 7 November 2017, a notice was published in the Official Journal of the European Union confirming the provisional application of the bilateral agreement between the European Union and the United States on prudential measures regarding insurance and reinsurance. The agreement was signed in September 2017 and covers, among other matters, group supervision and the exchange of insurance information between supervisors.
EIOPA consults on second set of advice on the Solvency II Delegated Regulation
On 6 November 2017, the European Insurance and Occupational Pensions Authority (EIOPA) published a consultation on its second set of advice on specific items in Commission Delegated Regulation (EU) 2015/35. The consultation is focussed on areas of the solvency capital standard formula not addressed in its first set of advice and proposes possible simplifications to calculations in the standard formula. Areas covered include: mortality and longevity risks, catastrophe risks, market risk concentration, look-through, risk margin and counter-party default risk. Responses are invited until 5 January 2018.
EIOPA publishes report on the investment behaviour of insurers
On 16 November 2017, EIOPA published a report based on the results of a survey conducted earlier in the year which sought to identify trends in the investment behaviour of insurers over the last five years against the backdrop of the persistent low yield environment. According to the report, the survey results reveal trends that could be associated with search-for-yield behaviour such as:
- increased exposures towards lower credit rating quality fixed income securities
- more illiquid investments such as non-listed equities and loans
- increased investment activity in non-traditional asset classes such as infrastructure, mortgages and real estate.
Court rules obligation to obtain consent before appointing lawyer incompatible with EU law on legal expenses insurance
On 27 October 2017, the European Free Trade Association Court (the EFTA Court) ruled that terms and conditions in a legal expenses contract which operate to release an insurance company from its obligations if the policyholder appoints a lawyer without its prior consent are incompatible with Article 201(a) of the Solvency II Directive. Article 201(a) gives policyholders the right to freely choose their own lawyer and requires legal expenses contracts to expressly provide for that right. While decisions of the EFTA Court are not binding, they are taken into account by the European Court of Justice.
Insurance Europe publishes paper on information overload and duplication
On 2 November 2017, Insurance Europe submitted a paper on 'information overload and duplication' to the European Commission's online REFIT Platform. According to the paper, IDD and PRIIPs will result in a significant increase in the volume of pre-contract information which must be provided to consumers. This, coupled with existing measures, risks consumers being overloaded and distracts from what is important. The paper also highlights where duplicative requirements exist across different EU measures and warns that this may result in consumers being provided with the same information more than once in different formats. The paper also argues that the default requirement under IDD and other EU measures to provide information on paper does not necessarily align with the demands of modern consumers.
Date published: 11 December 2017