Financial Services Regulation and Compliance - Insurance March 2023

Domestic

CBI publishes the Insurance Quarterly Newsletter for Q1 2023

On 21 March 2023, the CBI published its Insurance Quarterly Newsletter (the newsletter). The newsletter addresses a range of matters including the CBI's supervisory priorities for the insurance sector in 2023 and pricing discipline in general insurance.

The newsletter also provides a valuable synopsis of some of the major regulatory developments of the quarter, including the signing into law of the Central Bank (Individual Accountability) Act 2023 on 9 March 2023, EIOPA's Supervisory Statement on Governance in Third Country Branches on 3 February 2023, and its Report on the Implementation of Climate Related Adaptation Measures in Non-Life Underwriting Practices on 6 February 2023.

Insurance Corporations Statistics – Q4 2022 (see here)

The CBI released its latest insurance corporation statistics on 10 March 2022. Among the highlights are statistical indications that the trend of assets falling in the Irish insurance sector is levelling off, with a fall of 0.4% in Q4 2022 compared to 9% fall at the end of 2021. The statistics also note that technical reserve liabilities have decreased in the sector with non-life insurance technical reserves (ITRs) falling to 10% since Q3 2022, despite being up 7% on Q4 2021.

The statistics also evidenced a 20% fall in on-unit linked life ITR liabilities with debt security assets falling by 7%. Although to a lesser extent than in Q3 2022, the value of derivative liabilities continue to be greater than derivative assets.

Commencement of remaining sections of the Health Insurance (Amendment) Act 2021

The Minister for Health has ordered that, from 1 April 2023, paragraph (b) and (c) of section 5 of the Health Insurance (Amendment) Act 2021 will become operational and will introduce a time limit for insurers to claim risk equalisation credits from the Risk Equalisation Fund. Once operational, a claim (or part of a claim) cannot be made to the Health Insurance Authority if an insurer's entitlement to claim arose more than six years before 31 March in the year prior to the date of making the claim.

CBI feedback statement & the final guidance for (re)insurance undertakings on climate change risk

On 27 March 2023, the CBI published its anticipated Guidance for (Re)Insurance Undertakings on Climate Change Risk (the guidance) with the aim of clarifying its expectations on how (re)insurers address climate change risks and assisting their development of governance and risk management frameworks to do this. The guidance substantively reflects the CBI's Consultation Paper on the proposed Guidance, published on 3 August 2022 (the consultation paper), with some minor updates based on feedback from stakeholders.

The guidance does not introduce new requirements in relation to climate change risk, rather the CBI has indicated that its intention is to clarify its expectations on compliance with already existing Solvency II requirements, including the 2022 amendments in relation to climate change risk.

European

EIOPA launches Digitalisation Market Monitoring Survey to map financial innovation in insurance;

  • EIOPA launched on 6 March 2023 a new Digitalisation Market Monitoring Survey (the survey). The Survey will record the development of European life and non-life insurers' digital transformation strategies and to understand the use by these insurers of innovative business models and technologies.
  • The survey will collect information on the use of financial innovation in the insurance sector and evaluate the use level and governance measures of new technologies such as AI and blockchain. EIOPA intends to strengthen its evidence and risk based supervisory approach based on the responses received.
  • The survey, which is available until 30 June 2023, is being distributed by National Competent Authorities and is also available here.

EIOPA publishes technical information update

EIOPA published its monthly technical information on 3 March 2023 regarding the relevant risk free interest rate term structures with reference to the end of February. This technical information is used for the calculation of technical provisions for (re)insurance obligations. It also published technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of February 2023.

On the same date, EIOPA updated the Solvency II list of validations for the Insurance Data Point Model and Taxonomy 2.8.0 with validations for Insurance Data Point Model and Taxonomy 2.7.0.

EIOPA has also implemented the DPM methodology and the XBRL as the standard for data submission reporting between national competent authorities and EIOPA on 30 March 2023. This was implemented subsequent to a decision by Board of Supervisors on Collection of Information by EIOPA.

EIOPA supervisory statement targets 'price walking' practices (see here)

On 16 March 2023, EIOPA published a supervisory statement on differential pricing practices in non-life insurance lines of business (the statement) addressed to National Competent Authorities (such as the CBI). The statement does not introduce any new regulatory requirements but aims to clarify existing requirements to pre-empt unfair differential pricing practice. EIOPA notes that insurance product manufacturers should ensure that they have appropriate oversight and governance to ensure that pricing techniques does not result in customers being treated unfairly.

The statement sets out the following examples of unfair "price walking" practices which EIOPA feels are not compliant with the Insurance Distribution Directive:

  • repeatedly increasing insurance product premium at renewal stage based on a customer's low propensity to shop around
  • repeatedly increasing insurance product premium at renewal stage based on a customer's low-price elasticity (i.e. "willingness to pay") 
  • advising a potential customer to buy one insurance product over another because of a very low initial price, and then applying unexpected, significant, and repeated price increases

EIOPA explores nature-related risks and their impact on insurers in staff paper (see here)

EIOPA published a staff paper on nature-related risks and their relevance to (re)insurers and the sector as a whole, as well as the ways in which the sector can substantively contribute to the conservation and restoration of nature through investment and underwriting (the staff paper). The staff paper, published on 29 March is the first step in EIOPA's sustainable finance strategy of establishing supervisory expectations for the management of nature-related risks and impacts.

The staff paper identifies biodiversity and ecosystems as important aspects of efforts to combat climate change and notes that failure to support and protect biodiversity and ecosystems would not only exacerbate climate change but also a significant threat to financial stability. A number of areas are considered, including the following:

  • the transmission (i.e. the effects) of nature-related risks into society and economy
  • nature-related risks for (re)insurers' investments and liabilities and the assessment of and approaches to managing those risks
  • approaches to managing nature-related risks
  • the role of supervisors and regulators in integrating the consideration of nature-related risks into their prudential and conduct supervisory frameworks and providing guidance on risk-assessment methodologies

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

Date published: 13 April 2023