Financial Services Regulation and Compliance - Insurance July 2023

Domestic

New Occupiers’ Liability changes commenced

The Courts and Civil Law (Miscellaneous Provisions) Act 2023 (the Act) was signed into law on 5 July 2023. The Act amends occupiers' duty of care towards entrants onto their premises under the Occupier's Liability Act 1995. The relevant provisions of the Act were commenced on 31 July 2023.

ALG’s article ‘Striking a new balance | changes to occupiers’ liability – an insurance perspective’ is available here and addresses the topic in more detail.

CBI publishes employer and public liability statistics

The Central Bank of Ireland (CBI) published its first national claims information database mid-year data release on 13 July 2023 (the report). The report provides insights on the settled claims and costs relating to employer’s liability and public liability insurance covering a period from January 2015 to 30 June 2022. One key highlight in the report is that the average cost of a claim settled under the recently introduced personal injury guidelines is lower than those claims previously settled by reference to the Book of Quantum. 

LRC publishes consultation paper on third-party litigation funding

The Law Reform Commission (LRC) published a lengthy consultation paper on legalisation and regulation of third-party litigation funding in Ireland.

ALG’s article ‘Litigation funding spotlight in Ireland – the insurance dimension’ is available here and considers the insurance angles and the LRC’s consultation paper in more detail.

European

EIOPA publishes draft changes to PII and financial capacity rules under IDD

On 3 July 2023, the European Insurance and Occupational Pensions Authority (EIOPA) published its draft regulatory technical standards (RTS) adapting the base euro amounts for professional indemnity insurance (PII) cover and financial capacity of intermediaries under the Insurance Distribution Directive (IDD). The IDD requires a minimum level of PII to be held by intermediaries. EIOPA reviews that position and issues draft RTS to reflect inflation rates every five years. The base PII amount applying to each claim and the base aggregate PII level per year have both increased. Further, the base financial capacity level has also been raised.

  • The base PII amount applying to each claim is to increase from €1,300,380 to €1,564,610.
  • The base aggregate PII level per year is to increase from €1,924,560 to €2,315,610.
  • The base financial capacity level is to increase from €19,510 to €23,480.

EIOPA Report on Colleges Activities 2022 – Key developments and themes 

EIOPA published its report on the activities of colleges of supervisors in 2022 (the report) on 13 July 2023. The report sets out key developments among colleges of supervisors established in the EU/EEA to harmonise regulatory oversight of insurers operating on a cross-border basis in the EU/EEA. Notably, the number of colleges fell from 83 to 64 in 2022 due to M&A and branching-out activities. Among other matters, in 2022, college activity focused on:

  • the changing macro-economic environment
  • solvency risks
  • inflation
  • ESG and climate change scenarios

Looking forward, college activity will focus on financial resilience, climate change risk mitigation and prudential regulation.

EIOPA’s Retail Investment Strategy – IBIPs focus

The Head of Consumer Protection at EIOPA spoke at the public hearing of the European Parliament Committee on Economic and Monetary Affairs on the Commission’s proposal on retail investment strategy. That speech focused on the use of insurance-based investment products (IBIPs) by retail investors and makes three core points: 

  • the majority of consumers who purchase IBIPs are small, unsophisticated investors who tend to rely on the advice of their local intermediary / bank manager in relation to their investments
  • EIOPA recognises the need to treat customers fairly and welcomes the European Commission’s acceptance of its advice on promoting cost-efficiency of IBIPs and value for money
  • trust in financial advice and financial markets is built by ensuring that products entering the market are good quality, offer good value and meet the target market’s needs

EIOPA paper analyses barriers to purchase of natural catastrophe insurance

On 5 July 2023, EIOPA published a staff paper which analyses consumers' reluctance to purchase natural catastrophe (natcat) insurance and proposes ways in which EIOPA can help to bridge the insurance protection gap in Europe in this regard (the staff paper). The staff paper identifies key reasons for low uptake as including:

  • lack of clarity on the value of natcat cover
  • misperception of the risk of natcat events
  • high expectations of state intervention on the occurrence of such events

EIOPA proposes several measures to encourage uptake. These include the use of independent risk monitoring tools to increase risk awareness among the public, product standardisation and a more consumer-focused purchasing process.

EIOPA consults on third-country reinsurance

On 10 July 2023, EIOPA launched a consultation regarding reinsurance concluded with third country (re)insurers (TCRs). A supervisory statement has been published on which EIOPA has invited comments.

Reinforcement highlights identified by EIOPA include the importance of risk management when engaging with TCRs and ongoing supervisory dialogue. The consultation paper captures good practices by European supervisors that EIOPA has identified, which may signal pipeline enhancements. ALG’s article ‘Pipeline convergence from EIOPA: Third country reinsurance – How would your approach align?’ is available here and addresses this topic in more detail.

EIOPA paper on insurance stress testing of cyber risks

Following a period of stakeholder engagement, EIOPA published a fourth paper on Methodological Principles of Insurance Stress Testing on 11 July 2023 (the paper). The paper focuses on cyber risk and sets out rules, guidelines and approaches for assessing insurers' resilience to cyber incidents (in particular, their capabilities to withstand financial impact of severe incidents). The ultimate aim of the paper is to generate discussion on cyber risk exposure, and to encourage the development of a bottom-up approach to stress testing among insurers. The report emphasises that insurers should pay attention to the time and cost of restoring operations following a cyber incident, as this will have a direct impact on business interruption and associated financial loss.

EIOPA evaluates POG supervision

On 20 July 2023, EIOPA published a report on National Competent Authorities’ (NCAs) supervision of the application of product oversight and governance (POG) requirements by insurance manufacturers under the IDD and the relevant delegated regulation (the report). In summary, the report finds that most NCAs cater for POG within their overall supervisory framework. Significantly, Ireland is positioned in the highest category of compliance, having been found to be broadly meeting EIOPA’s expectations. However, the report also recommends that the CBI informs insurance manufacturers of the practical steps they might take to meet their POG requirements for IBIPs on a day-to-day basis.

EIOPA publishes technical information updates

EIOPA published its monthly technical information on 5 July 2023 regarding the relevant risk-free interest rate term structures with reference to the end of June 2023, for Solvency II purposes. This technical information is used for the calculation of technical provisions for (re)insurance obligations. On the same date, it also published technical information on the symmetric adjustment of the equity capital charge under Solvency II with reference to the end of June 2023.

Additionally, EIOPA updated its insurance data point model methodology (DPM) and taxonomy standards (XBRL) on 31 July 2023. DPM and XBRL are the standard for reporting data submission between EIOPA and NCAs.

EIOPA consults on an open insurance use case and features of an insurance dashboard

On 24 July 2023, EIOPA launched a consultation on open insurance. The consultation is focussed on a ‘use case’ which is an example of a format for how open insurance might take shape in practice. Broadly speaking, open insurance means facilitating the exchange of customer data between different financial product and services providers.

The use case selected by EIOPA is an insurance dashboard which enables customers to view all their insurance products in one location. While this dashboard is not endorsed by EIOPA as a good example of an insurance dashboard, it does indicate that dashboards are likely the next step in launching the open insurance framework across the EU.

ESG & Sustainability Bulletin

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For more information on these topics please contact any member of A&L Goodbody's Insurance & Reinsurance team.

Date published: 16 August 2023