Financial Services Regulation and Compliance - Insurance September 2022

Domestic

CBI Insurance Quarterly Newsletter Q3 2022

The CBI published its Insurance Quarterly Newsletter on 16 September 2022. Key matters addressed include the CBI's observations from a thematic review of ORSAs in the context of climate change risk, digitalisation in the insurance sector, the CBI's thematic inspection of governance and oversight controls for underwriting managing general agents and the impact of COVID-19 on operational resilience.

The newsletter also features several industry updates at a European level, including the publication of the European Insurance and Occupational Pensions Authority's (EIOPA) Peer Review Report on Outsourcing and EIOPA's consultation on its supervisory statement on the use of governance arrangements in third countries. Looking ahead, the newsletter reminds readers that the submission deadline for the outsourcing register submission to aid the identification of critical service providers is 13 October 2022 and that a digitalisation survey is expected to issue to a sample of Irish undertakings during Q4 2022.

CBI: Insurance Corporations Statistics - Q2 2022

On 9 September 2022, the CBI published its Insurance Corporations Statistics for Q2 2022. The key points are that:

  • In line with conditions in the global market, total assets of Irish insurance corporations fell by 5.5%. This is the first time total assets have fallen for two consecutive quarters since the CBI began reporting this statistic in 2016.
  • Life insurance technical reserves fell by €23.7bn, a decrease which was partially offset by an increase in non-life insurance technical reserves of €2.7bn during Q2 2022.

CBI review identifies evidence of increasing levels of under-insurance in the home insurance market

The CBI wrote to insurers' CEOs on 22 September 2022, outlining its expectations of insurers following a review of the risk posed of insufficient home insurance cover to consumers.

The review found that under-insurance in the home insurance market has been steadily rising over the last five years, leading to an increase in the average reduction of claims due to underinsurance. The review found that while some insurers have proactively taken steps to help mitigate the risk of under-insurance to the consumer, action is needed on behalf of all insurers.

In its letter, the CBI outlines its expectations and the steps to be taken by insurers, including the establishment of a plan to address the points raised by the CBI. Insurers are requested to submit their plans to the CBI by 28 October 2022.

European

EIOPA publishes monthly technical information for Solvency II risk-free interest rate term structures and the equity capital charge

On 5 September 2022, EIOPA published monthly technical information on the relevant risk free interest rate term structures with reference to the end of July 2022. This technical information is used for the calculation of technical provisions for (re)insurance obligations. Upcoming publication dates in 2022 are set as 6 October, 7 November and 5 December.

EIOPA also published the technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of August 2022.

EIOPA updates the RFR technical documentation

EIOPA published the updated technical documentation of the methodology to derive EIOPA’s relevant risk free interest rate term structures on 16 September 2022.

The technical documentation was updated in order to take account of changes in the financial market, including:

  • the results of the Deep, Liquid and Transparent assessment 2022 (as well as the resulting changes to the calculation of the Credit Risk Adjustment)
  • the Peer Country Review from Q1 2022
  • an update to the method used to calculate the Danish Volatility Adjustment

The updated technical documentation will apply from January 2023.

EIOPA's Report on data quality in Solvency II reporting

On 6 September 2022, EIOPA published a report on data quality in Solvency II reporting. The report discusses improvements made to data reporting since the introduction of Solvency II in 2016.

Improvement in data quality during the period are attributed to automated data quality processing solutions, advanced analytic tools and built-in validations in the XRBL taxonomy. EIOPA predicts further improvements in the quality of data shared as members further develop and refine tools and techniques.

EIOPA publishes supervisory statements on exclusions related to systemic events and the management of non-affirmative cyber exposures

On 22 September, EIOPA published two supervisory statements.

The first supervisory statement addresses exclusions relating to cover for systemic events (e.g. pandemics). EIOPA expressed concern that the increased occurrence of such events would lead to protection gaps due to product unaffordability and/or unavailability. Accordingly, EIOPA advises national competent to monitor insurance product manufacturers to ensure that their product information is clear, and that there is appropriate product oversight and governance in place. In addition, EIOPA recommends that product manufacturers should assess whether the needs of the target market for a new product may include cover for systemic events.

The second supervisory statement relates to management of non-affirmative cyber exposures. In particular, EIOPA encourages national competent authorities to pay close attention to insurance undertakings assessments of their products covering cyber risk, noting that insurance undertakings may be exposed to loss through policies which may not explicitly reference cyber-related exposures. 

EIOPA sets out its strategic direction for 2023 – 2026

EIOPA has published its strategy for the period 2023 – 2026. Its key objective for the period is to build a safe and sustainable EU for citizens in times of transformation. EIOPA notes that current geopolitical tensions due to Russia’s invasion of Ukraine, coupled with economic recovery from COVID-19, market volatility and inflation underline the need for effective supervision.

EIOPA has identified the following as strategic priorities for the period:

  • sustainable finance
  • digital transformation
  • supervision
  • policy
  • financial stability
  • internal governance

EIOPA publishes single programming document, including annual work plan for 2023

EIOPA has published its single programming document, which includes its annual work plan for 2023. Key insurance-focused activities that EIOPA plans to carry out in 2023 include:

  • integrating ESG risks in the prudential frameworks on insurers as well as initiating a one-off coordinated climate change stress test
  • the implementation of the Digital Operational Resilience Act
  • developing a sound regime for the use of artificial intelligence by the insurance sector
  • addressing consumer detriment from cross-border activities

Sanctions imposed in response to the crisis in the Ukraine

Since February, the EU imposed a number of sanctions in response to the crisis in the Ukraine. Given that the crisis is developing and sanctions are continuing to evolve, the CBI is publishing details of new restrictive measures/sanctions that are adopted in this regard, as well as any associated EU/UN guidance, on their dedicated webpage.

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

Date published: 17 October 2022