Financial Services Regulation and Compliance - Insurance October 2023

Domestic

MoU for reporting insurance fraud which has been agreed between An Garda Siochana, Insurance Ireland and the Alliance for Insurance Reform (see here)

On 24 October 2023, the Memoranda of Understanding (MoU) for reporting Insurance fraud was signed by An Garda Síochána, Insurance Ireland and the Alliance for Insurance Reform. A welcome development, the MoU sets out a process for reporting, assessing and investigating suspected instances of insurance fraud, (which can ultimately result in higher premiums for consumers). The MoU represents one of the final outstanding measures to be taken pursuant to the Government’s Action Plan for Insurance Reform (the plan) with 90% of all actions identified in the plan now being either complete or well underway to completion.

European

EIOPA: European Insurance Overview report 2023 (see here)

The European Insurance and Occupational Pensions Authority (EIOPA) has published its annual European Insurance Overview Report based on 2022 Solvency II information collated from solo life and non-life (re)insurers across EEA member states. It notes that gross written premiums (GWP) generally decreased in the life insurance sector in 2022 but GWP in the non-life insurance sector generally increased. Also considered are median SCR coverage ratios are noted as being above 155% throughout the EEA. Finally, the report examines insurers investment profiles, noting that government / corporate bonds and collective investment undertakings account for approximately 70% of Solvency II investments with an additional 17% consisting of equity investments.

EIOPA’s Digital Strategy (see here)

In recognition of ever-increasing rates of digitalisation and technological advancement, EIOPA published its new Digital Strategy on 12 October 2023. The strategy seeks to define EIOPA’s role over the coming years in relation to the digitalisation of the insurance sector. The strategy is underpinned by two core principles, namely being technologically neutral and people first; and flexible yet firmly rooted.

EIOPA has identified the following items as long term priorities in relation to its digitalisation strategy:

  • alignment of innovation with the citizens’ best interests
  • ensuring business models of insurance market participants are sustainable and strong
  • improving the supervisory capabilities of EIOPA and National Competent Authorities

EIOPA’S Report on the Impact of Inflation on the Insurance Sector (see here)

On 5 October, EIOPA published a report on the impacts of inflation in the European insurance sector. The report analyses the impact of the inflationary environment to date and the potential risks for the insurance sector in the short, medium and long-term due to the volatility of inflation rates. The report notes that due to the increase in inflation, (re)insurers’ asset to liability ratio has trended downwards and that therefore, a persistent high-inflation environment is likely to be a source of increasing risk for the sector. 

EIOPA sets out work plan for 2024-2026 (see here)

On 26 September 2023, EIOPA published its revised single programming document for 2024 – 2026 which includes the Annual Work Programme for 2024. The single programming document sets out EIOPA’s main strategic activity areas for 2024, which include the following:

  • integrating sustainable finance considerations across all areas of work
  • supporting consumers, the market and the supervisory community through digital transformation
  • enhancing the quality and effectiveness of prudential and conduct of business supervision
  • ensuring technically sound conduct of business and prudential policy
  • identifying, assessing, monitoring and reporting on risks to the financial stability and promoting preventative policies and mitigating actions
  • ensuring good governance, agile organisation, cost-effective resource management and a strong corporate culture

EIOPA states that it expects to carry out policy work for a number of legislative initiatives including the Digital Operational Resilience Act (DORA), the Solvency II Review, the Insurance Recovery and Resolution Directive (IRRD), the European Single Access Point (ESAP), the Artificial Intelligence (AI) Act, the Cyber Security and Information Security Regulations, and potential work relating to the Retail Investment Strategy.

EIOPA: Updated technical RFR documentation applicable as of 1 January 2024 (see here)

EIOPA published updated technical documentation for calculating the risk-free interest rate term structures (RFR). RFR term structures may be as part of calculating the technical provisions for (re)insurance obligations. The technical documentation provides an overview of the changes and focuses on the assessment of the financial instruments used for constructing the RFR information.

EIOPA consults on the supervision of captive (re)insurers with a focus on intra-group transactions, the prudent person principle and governance (see here)

On 6 October EIOPA launched a public consultation on its opinion regarding the supervision of captive (re)insurance undertakings, with a particular view on intra-group transactions, the prudent person principle and governance.

This draft opinion is addressed to competent authorities and outlines the supervisory expectations while taking into account the specificities of a captive (re)insurer’s business model. Addressed to competent authorities, the opinion aims to facilitate a risk-based and proportionate supervision of captive (re)insurance undertakings and further support the convergence of supervisory expectations in the context of creating a level playing field within the EU.

The final date for submission of feedback on the EIOPA consultation paper is 5 January 2023.

EIOPA publishes monthly technical information – end-September 2023 (see here and here)

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

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

Date published: 22 November 2023