Financial Services Regulation and Compliance - Insurance Dec 2019

DOMESTIC

Central Bank of Ireland publishes first Motor Insurance Report of the National Claims Information Database

On 16 December 2019, the Central Bank of Ireland (CBI) published the first annual Private Motor Insurance Report of the National Claims Information Database. The report aims to improve transparency and understanding of issues which affect the functioning of the Irish insurance market.  The report is based on data gathered from all insurers selling private motor insurance in Ireland, regardless of the country of authorisation. The report highlights (among other matters):

  • the importance of the cost of claims to the level of insurance premium
  • the cyclicality of the Irish insurance market
  • claims settlement processes

Health Insurance (Amendment) Bill 2019 (updated 18 December 2019)

The Health Insurance (Amendment) Bill was passed by the Seanad on 18 December 2019. The Bill amends the Health Insurance Act 1994 to:

  • specify the amount of premium to be paid from the Risk Equalisation Fund in respect of certain classes of insured persons from 1 April 2020
  • specify the amount of the hospital utilisation credit applicable from 1 April 2020
  • make a consequential amendment to the Stamp Duties Consolidation Act 1999
  • to provide for related matters

CBI publishes its Insurance Newsletter for December 2019

The CBI has published its Insurance Newsletter for December 2019. Key topics include (among other matters):

  • The reliability of data used in SCR calculations. The CBI recommends the implementation of internal controls such as peer review and sign-off of data.
  • Liquidity risk management - the CBI recommends that firms clearly define the approved risk tolerance limits for liquidity risk. Firms should take into account the nature, scope and time periods of the business leading to liquidity risk exposure as well as measuring liquidity risk in both benign circumstances and under stress. Firms are expected to consider the potential costs or financial losses arising from a liquidity issue and have contingency plans in place.

Consumer Insurance Contracts Act 2019 signed into law

On 26 December 2019, the Consumer Insurance Contracts Act was signed into law. The Act has not yet been commenced. The Act will apply to consumer insurance contracts only. Some of the key changes introduced by the Act include:

  • the replacement of the contractual duty of disclosure with a statutory duty to answer all questions posed by the insurer honestly and with reasonable care
  • proportionate remedies for misrepresentation by reference to whether the misrepresentation was innocent, negligent or fraudulent
  • delays in the notification of a claim by a consumer to an insurer will not repudiate coverage so long as the delay does not prejudice the insurer

CBI discussion paper on the Use of Service Companies in the Insurance Sector

The CBI has published a discussion paper on the use of service companies in the insurance sector. The discussion paper focuses in particular on issues such as:

  • the appropriateness and adequacy of the initial and ongoing risk identification and management of arrangements with service companies
  • the adequacy of the protections provided for policyholders and other beneficiaries on an ongoing basis and in stress scenarios
  • the substance in the Irish undertaking

Feedback is sought from boards and senior management of insurance undertakings as to how they satisfy themselves, and appropriately demonstrate compliance with relevant requirements, standards and supervisory expectations when utilising service companies. Feedback is invited until 31 January 2020.

EUROPEAN

EIOPA identifies areas where risks for consumers remain high

On 19 December 2019, EIOPA published its 2019 Consumer Trends Report outlining developments in the insurance and pensions sector. Unit-linked insurance, credit life and credit protection products, add-on insurance and innovations in motor insurance have all been identified as areas of concern for consumers. The report also noted positive developments, in particular the increased focus on product oversight and governance brought about by the disclosure requirements in the Insurance Distribution Directive and the Packaged Retail and Insurance-based Investment Products Regulation.

EIOPA publishes advice on potential undue short-term pressures from financial markets

On 18 December 2019, EIOPA published advice on the potential for undue short-term pressure from financial markets on corporates. EIOPA recommends developing a cross-sectorial framework in order to promote long-term investments as well as supporting sustainable economic growth. EIOPA also recommends facilitating the publication of long-term performance metrics to focus in on long-term value creation rather than immediate shareholders' interests or excessively short-term profitability objectives.

EIOPA outlines key financial stability risks of the European insurance and pensions sector

On 18 December 2019, EIOPA published its financial stability report. Key risks include (among other matters):

  • a low yield environment, which exerts pressure on solvency positions as well as long term profitability (this has been identified as the biggest risk for European insurers)
  • a combination of a weakening economic outlook, concerns over debt sustainability and stretched valuations across financial markets
  • cyber and climate change related risks
  • links with banks and home-bias in investments paving the way for potential spill overs of risks from other sectors

In addition, the report includes two thematic articles, one on a climate risk assessment of the sovereign bond portfolio of European Insurers and the other on the impact of variation margining on EU insurer's liquidity.

EIOPA updates representative portfolios to calculate volatility adjustments to the Solvency II risk-free interest rate term structures

On 17 December 2019, EIOPA published updated representative portfolios to be used in the calculation of the volatility adjustments to the relevant risk-free interest rate term structures for Solvency II. EIOPA will publish the volatility adjustment at the beginning of April 2020.

EIOPA publishes its fourth annual analysis on the use and impact of long-term guarantees measures and measures on equity risk

On 17 December 2019, EIOPA published its 2019 Annual Report on Long Term Guarantee Measures and Measures on Equity Risk. These reports will underpin the opinion on the 2020 review of Solvency II. The results show that the long-term guarantee measures are widely used, especially the volatility adjustment and transitional measure on technical provisions.

EIOPA publishes a report on insurers’ asset and liability management in relation to the illiquidity of their liabilities

On 16 December 2019, EIOPA published a report on insurers' asset and liability management in relation to the illiquidity of their liabilities. Key topics include (among other matters):

  • insurance liabilities
  • the asset management of insurers
  • long term guarantee measures
  • the market valuation of insurance liabilities

This report will be used as a basis for the opinion on the 2020 Review of Solvency II.

EIOPA publishes annual report on the use of capital add-ons under Solvency II

On 13 December 2019, EIOPA published its annual report on the use of capital add-ons by national competent authorities under Solvency II. The report is based on 2018 year end Solvency II data.

EIOPA publishes monthly technical information for Solvency II Relevant Risk Free Interest Rate Term Structures – and second parallel technical information based on Refinitiv data end-November 2019

On 5 December 2019, EIOPA published technical information on the relevant risk free interest rate term structures with reference to the end of November 2019. EIOPA additionally published the third parallel technical information on the relevant risk free interest term structures with reference to the end of November 2019 based on Refinitiv data.

Two European Commission Implementing Regulations on Solvency II reporting and disclosure requirements published in the Official Journal

On 10 December 2019, two regulations were published in the Official Journal of the EU.

Commission Implementing Regulation (EU) 2019/2102 amends Implementing Regulation 2015/2452 in relation to the disclosure of information used in calculating the adjustment for the loss-absorbing capacity of deferred taxes. The regulation was made on 27 November 2019 and entered into force on 1 January 2020.

Commission Implementing Regulation (EU) 2019/2103 amends and corrects Implementing Regulation (EU) 2015/2450 laying down implementing technical standards with regard to templates for the submission of information to supervisors in accordance with Articles 35(10) and 244(6)(3) of the Solvency II Directive. The Regulation was made on 27 November 2019 and entered into force on 30 December 2019.

For more information on this topic please contact any member of A&L Goodbody's Financial Regulation team.

Date published: 13 January 2020