Tracker, Financial Services Regulation & Compliance - Insurance

DOMESTIC

Central Bank publishes National Specific Templates

The Central Bank of Ireland (the CBI) recently published the majority of its Solvency II national specific templates (NSTs). These NSTs must be used for periodic reporting under Solvency II.  The NSTs published relate to (a) non-life technical provisions and claims templates and (b) variable annuity business. Technical specification documents have also been issued (which provide guidance on NST completion/submission).   NSTs relating to life and non-life income statements are yet to be published by the CBI.  XBRL taxonomy (a computer readable reporting classification language) is expected to be published by the CBI before the end of November. This must be used when reporting using the NSTs. Separately, the CBI has published NSTs to cater for new European Central Bank (ECB) statistical reporting requirements. These will allow the CBI to gather the additional information it needs (i.e. beyond that contained in Solvency II NSTs) in order to comply with ECB requirements.

September edition of CBI Solvency II Matters Newsletter

The CBI recently published the September edition of its Solvency II Matters newsletter. This contains updates on issues including (a) introduction of new PCF, Head of Actuarial Function, from 1 January 2016 and (b) that a new set of draft conditions of authorisation and revised certificates of authorisation will be issued to (re)insurers (allowing 21 days for comment by the (re)insurer) for the purpose of Solvency II. Notably, the newsletter emphasises that (re)insurers' boards of directors should be moving beyond a 'compliance/implementation' approach to Solvency II; and towards considering long-term strategic implications such as review of policies, processes and business model. An overview of the reorganisation of the insurance directorate within the Central Bank is also provided, reflecting the amalgamation of the general and life supervision divisions and the establishment of a new Advisory, Analytics and Actuarial Division.

High Court overturns FSO decision on non-disclosure of material fact

In Earls v The Financial Service Ombudsman & Anor [2015] IEHC 536, the High Court of Ireland overturned a Financial Services Ombudsman (FSO) finding that an insured had failed to disclose a material fact in their insurance application and remitted the case to the FSO for (re)consideration. In coming to its decision, the Court carried out a case law analysis on non-disclosure in insurance applications and the principles to be applied.

Insurance Ireland comments on motor insurance issues

On 4 September 2015, Insurance Ireland issued a press release warning of the potential impact of the recent High Court judgment regarding Setanta Insurance (The Law Society of Ireland v The Motor Insurers' Bureau of Ireland (MIBI) [2015] IEHC 564).  Insurance Ireland's view is that the net effect of requiring the MIBI to cover claims brought by/against drivers who held policies with Setanta include that (a) all motor insurers will now effectively be underwriting the least prudent insurer in the industry, with knock-on implications for solvency and capital considerations, (b) liquidation may now be a viable option for an imprudent insurer to pass off losses to others insurers in the market and (c) a risk of insurers exiting the Irish market may have been created.  Separately, Insurance Ireland issued a press release regarding factors contributing to increased premiums. This identifies measures which may assist to halt the increasing the cost of insurance claims including reduction of legal costs, acting to deter fraudsters and (for motor insurance) amending legislation to clarify the roles of the MIBI and the Insurance Compensation Fund.

Report on the administration of the Insurance Compensation Fund released

On 24 September 2015, the Department of Finance published a report titled 'Report on Administration of Insurance Compensation Fund for the year ended 31 December 2014 - Movement of the Fund in the year to 31 December 2014'.  The report highlights a slight reduction in the overall deficit of the fund when compared to year-end 2013.

Insurance Ireland publishes 2014 Fact File

Insurance Ireland published its 2014 Fact File on 25 September 2015. The Fact File describes the role of Insurance Ireland as a representative of member companies to all stakeholders (including Government, media, customers and the wider public) and as a source of information on the domestic and international business of insurers based in Ireland.  Notable trends identified in the report include an increase of 11.4% in the level of gross premium income for life and non-life insurance combined, when compared with 2013; as well as an increase in the capital value of assets in many investment areas. The report also notes an operating loss in the non-life insurance market of €78 million (after investment income is added) during 2014.

EU & INTERNATIONAL

EIOPA updates - Bermuda and Switzerland Solvency II Equivalence

On 4 September 2015, the European Insurance and Occupational Pensions Authority (EIOPA) issued a progress report on Bermuda's third country equivalence under Solvency II. As with EIOPA's prior report, the update relates to commercial insurers in Bermuda (and not to captives or special purpose (re)insurers). Subject to certain caveats, Bermuda now meets the equivalence criteria. On 24 September 2015, the Commission Delegated Decision ((EU) 2015/1062) published in the Official Journal of the EU confirmed full equivalence for Switzerland from 1 January 2016.

EIOPA updates draft ITS and publishes second set of Solvency II guidelines

On 8 September 2015, EIOPA published revised draft implementing technical standards (ITS) on templates for submission of information to supervisory authorities (together with revised technical annexes). On 14 September 2014, EIOPA also published final versions of its second set of Solvency II guidelines. In total, nine guidelines have been published (which will apply from 1 January 2016). These include Guidelines on System of Governance and Guidelines on Own Risk Solvency Assessment; as well as guidelines relating to reporting and disclosure, implementation of long term guarantee measures, recognition and valuation of assets/liabilities other than technical provisions, and other matters.

EIOPA speech on the implementation of Solvency II

On 10 September 2015, EIOPA published a speech delivered by its Chairman regarding Solvency II implementation. Interestingly, this highlighted that EIOPA would be on the lookout for inadvertent consequences of Solvency II implementation; particularly any negative impact for consumers. Areas highlighted by EIOPA as those it would monitor in this regard include (a) (re)insurers' investment behaviour, (b) insurance product availability and (c) risk culture and ORSA practices.

Insurance Europe urges focus on implementing BEPS project

On 11 September 2015, Insurance Europe published its response (dated 9 September) to the European Commission's consultation on further corporate tax transparency. In this and its accompanying website statement, Insurance Europe urged the European Commission to focus on coordinating implementation of the Organisation for Economic Co-Operation and Development's base erosion and profit shifting (BEPS) project amongst Member States; to ensuring this is as harmonised as possible.  Notably, Insurance Europe states that (a) the robust regulation to which the insurance industry is currently subject places a natural limit on BEPS activity and (b) the only objective in the consultation paper it is supporting is the targeting of tax evasion/avoidance (by assisting tax authorities in orienting their tax audits).   

Insurance Europe comments on General Data Protection Regulation

Insurance Europe recently published an overview of its key comments in relation to the General Data Protection Regulation. It recognises protection of policyholder data as a priority for insurers, but stressed the need to avoid negative unintended consequences for the insurance industry and consumers. Amongst other matters, Insurance Europe voices its support for fraud prevention as a 'legitimate interest', which would provide insurers with a legal basis to combat insurance fraud.  It also welcomes the proposal to explicitly permit transmission of data within a group of companies.

EIOPA speech regarding strategy for global insurance supervision

On 8 September 2015, EIOPA published a speech delivered by its Chairman regarding global insurance supervision.  He noted the ongoing emphasis on transforming international financial regulation and highlighted certain key themes in this regard.  These included (a) recovery and resolution in insurance, (b) the international capital standard and (c) conduct risk (EIOPA's key focuses in this regard include systemic monitoring to identify such risks and strengthening corporate governance to ensure that consumer interests are protected throughout the product lifecycle).

EIOPA update to ECON

On 14 September 2015, EIOPA published a statement delivered by its Chairman to the Committee on Economic and Monetary Affairs (ECON); reporting on EIOPAs achievements and anticipated challenges during the preceding year. The update illustrated EIOPA's focus on Solvency II issues including (a) supervisory convergence, (b) proportionality in the implementation of Solvency II and the importance of this for smaller (re)insurers, and (c) the development of a Solvency II supervisory handbook to assist national supervisory authorities. Other issues highlighted included EIOPA' work on the oversight of cross-border groups and on consumer protection.

EU-US Insurance Project to host public event

The EU-US Insurance Project will host a public event in Maryland, USA, on 22 November 2015. The purpose of the event is to update the public on the work of the Project and its plans for the future. In particular, the current state of transatlantic insurance firm supervision and the challenges facing such firms will be discussed. The event will be led by representatives of the NAIC, the Federal Insurance Office of the U.S., the Department of Treasury, the European Commission and EIOPA.

IAIS publishes September 2015 newsletter

The International Association of Insurance Supervisors (IAIS) recently published its September 2015 newsletter. This includes an article by the Access to Insurance Initiative (A2ii) on support for micro-insurance in regulation/supervision:- highlighting progress made and challenges anticipated. Other developments noted in the newsletter include (a) the submission of a proposal on higher loss absorbency design to the IAIS' joint Financial Stability and Technical Committees on 4 September and (b) a meeting held on 2 September by the IAIS Financial Crime Task Force to commence work on an Issues Paper on Cyber-Crime Risks to the Insurance Sector.

EIOPA publishes opinion on group solvency

On 25 September 2015, EIOPA published an opinion regarding the group solvency calculation under Solvency II where a group includes a (re)insurer in a third country jurisdiction that has achieved equivalence (or provisional equivalence). EIOPA has identified risks arising from potential differing practices of assessing group solvency in such a scenario. Its opinion sets out recommend methods of dealing with issues including the capital requirement of the third country (re)insurer, availability of eligible own funds at group level and monitoring of group solvency position. Practical examples are included in the Annex to the opinion.

IAIS publishes responses to consultation on conduct of business risk

On 28 August 2015, the International Association of Insurance Supervisors (IAIS) published a compilation of comments received by it on its recent consultation regarding business risk and its management. Amongst those who responded are Insurance Europe, the FCA and Lloyd's.

IAIS launches solvency-related ICP review

On 8 September 2015, the IAIS announced a self-assessment and peer review on its solvency-related Insurance Core Principles (ICPs). The assessment and peer review takes the form of a questionnaire addressed to IAIS members assessing observance on various ICPs. The ICPs concerned relate to valuation (ICP 14), investment (ICP 15), enterprise risk management (ICP 16), capital adequacy (ICP 17) and public disclosure (ICP 20). Responses are invited by 6 October 2016.

UK FCA publishes final rules banning opt-out selling of insurance add-ons

On 28 September 2015, the UK Financial Conduct Authority (FCA) published a policy statement (PS15/22) on banning opt-out selling across financial services and improving information provided to customers buying general insurance add-ons. The policy statement contains (a) an overview of the general insurance add-ons issue for consumers and proposed remedies, (b) feedback received in relation to the consultations/proposals for the ban on opt-out selling of insurance add-ons, (c) the rules banning opt-out selling and (d) FCA Handbook and non-handbook guidance on add-on sales. The rules and handbook guidance come into force on 1 April 2016. While the non-handbook guidance has immediate effect, the statement notes that firms need time to implement changes to sales processes, which should be completed by 30 September 2016.

Insurance Europe releases insurers' investment figures

On 2 September 2015, Insurance Europe published figures showing that European insurers held investments totalling €9,900 billion during 2014. Insurance Europe expressed concern that the risk associated with long term investments under Solvency II may make it very costly for insurers to continue to make such investments in the future. The figures also show that claims and benefits paid out in 2014 by European insurers totalled €943 billion.

Lloyd's aligns with FCA rules on charging for telephone calls

On 18 September 2015, the Society of Lloyd's in the UK published a market bulletin announcing that it had updated its code for personal lines claims and complaints handling.  The changes (proposed to take effect from 26 October 2015) prohibit managing agents from charging complainants more than the basic rate for a call made to the complaints helpline. This will mirror a similar FCA restriction expected to take effect from 26 October 2015. The bulletin also notes that Lloyd's intention is to make further revisions to its code during 2016 to reflect other FCA developments relating to complaints reporting.

UK PRA releases letter on Solvency II regulatory approvals for 1 January 2016

On 24 September 2015, the Prudential Regulatory Authority in the UK (PRA) released a letter issued by it to (re)insurers which summarises the PRA's proposed approach to a number of Solvency II-related approvals ahead of 1 January 2016.  The PRA intends to issue simultaneous 'approve' or 'reject' decisions to firms in early November in relation to use of the matching adjustment and early December regarding the internal model approval process. The PRA stresses that firms should have robust back-up plans in place to cater for the possibility that their applications are not approved. The letter also details how the PRA intends to consider, process and apply capital add-ons.

UK PRA issues consultation paper on Solvency II ITS, system of governance and ORSA

On 28 August 2015, the PRA issued a consultation paper on its approach to EIOPA's (a) second set of Solvency II Implementing Technical Standards, (b) draft Guidelines on Systems of Governance and (c) draft Guidelines on Own Risk and Solvency Assessment (ORSA). The paper contains a draft PRA supervisory statement and commentary on various aspects of the Guidelines (in particular, on reporting requirements). Responses are invited by 30 September 2015.

UK PRA Solvency II update letter

On 16 September 2015, the PRA published a letter sent to directors of insurers in relation to Solvency II implementation.  Amongst other matters, the PRA has confirmed (a) that its review of applications for Solvency II approvals is a priority and (b) its intention to shortly issue revised instructions on the need to split internal model outputs by line of business. An Annex to the letter contains guidance and PRA expectations regarding firms' use of the Transition Deduction to Technical Provisions.

UK PRA publishes updated version of Solvency II XBRL filing manual

On 17 September 2015, the PRA published an updated version (v1.1) of the Solvency II XBRL taxonomy filing manual.  The purpose of this is to assist (re)insurers and software vendors in creating XBRL documents for reporting in the preparatory phase prior to implementation on 1 January 2016. The document includes troubleshooting guidelines on common issues arising with Solvency II XBRL documents and how to resolve them.

UK PRA publishes Q&As on regulatory reporting under Solvency II

The PRA recently published its third Q&A document on regulatory reporting for the purpose of Solvency II.  This sets out PRA opinions and expectations, based on various queries which the PRA has received from (re)insurers.

UK PRA updates on UK Senior Insurance Managers Regime

The PRA recently issued a letter to insurers regarding implementation of its senior insurance managers' regime (SIMR) for both Solvency II and non-Solvency II firms. All insurers seeking to grandfather persons currently approved must make the relevant submission to the PRA by 8 February 2016. Firms to which Solvency II applies must notify the PRA of its key function holders at 1 January 2016. On 18 September 2015, the PRA and FCA issued consultation papers (FCA CP15/19 and PRA CP 35/15) relating to SIMR and other approved persons forms. Comments are invited until 19 October 2015.

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

Date published: 02 October 2015