Tracker, Financial Services Regulation & Compliance - Insurance

DOMESTIC

CBI consults on guidance on the role of Head of Actuarial Function
On 20 May 2016, the Central Bank of Ireland (CBI) published Consultation Paper 103 on Guidance for (Re)Insurance undertakings on the Head of Actuarial Function Role. The proposed guidance is intended to assist (re)insurers by providing an overview of the issues that should be considered by the Head of Actuarial Function (HoAF). These include (a) the HoAF's opinion on underwriting policy, reinsurance arrangements and Own Solvency Risk Assessment (OSRA), (b) the HoAF's contribution to the risk management system, and (c) the calculation of capital requirements. Submissions are invited by 12 August 2016.

CBI updates Solvency II-related publications
On 20 May 2016, the CBI updated its Solvency II Information Note 8.  When originally issued, this confirmed the CBI's intention to comply with European Insurance and Occupational Pensions Authority's (EIOPA) Set 2 Guidelines on Solvency II. The updates now confirm that the CBI (a) complies with the Guidelines (now expanded to include supervision of branches of third-country insurers - in respect of which the CBI has notified EIOPA that it intends to comply as there are currently no such branches in Ireland) and (b) reiterates its expectation that (re)insurers comply with the Guidelines.  The CBI also recently issued Solvency II Information Note 6 (confirming its intention to comply with all of the Set 1 Guidelines on Solvency II. On 3 May 2016, the CBI published updated Notes on Compilation of Statistics National Specific Template 13 (NST 13).  NST 13 is one of the templates developed by the CBI for gathering data for macro-economic statistical purposes beyond that required by Solvency II; but which must be completed by all (re)insurers reporting under Solvency II.  

CBI industry-wide publications on FLAOR and reporting
In early May, the CBI published industry-wide 'Dear CEO' correspondence on (a) Forward Looking Assessment of Own Risk (FLAOR) and (b) Solvency II reporting.  Following its review of 2015 FLAOR reports, the CBI has provided guidance on recurring issues including (a) assessment of overall solvency needs, (b) continuous compliance with regulatory capital requirements, (c) size, structure and content of the report, and (d) timing.   Areas for improvement identified include assessing the impact of future material changes in risk profile on capital or own funds; and shortening the period between data becoming available and the Board's consideration of it. The CBI also emphasised the importance of data quality/plausibility in reports submitted to it (and confirmed that it will be performing checks in this regard).  

CBI speech on consumer risk – insurance-specific focuses
On 18 May 2016, the CBI published a speech given by its Head of Consumer Protection (Supervision Division) to the Society of Actuaries on consumer risk.  Interestingly, she mentioned that risks particularly relevant to the insurance sector are (a) the current operating environment (noted to be challenging), (b) service delivery (including the risks introduced by new technology) and (c) IT resilience and data security. On a cross-sectoral level, two of the biggest risks the CBI sees to its consumer protection objectives are poor product oversight and governance; and an absence of consumer-focused culture.

CBI's Governor Lane speaks at Insurance Europe Conference in Dublin
On 25 May 2016, the Governor of the CBI spoke at the 8th Insurance Europe Conference held in Dublin.  Key points highlighted included the themes of the conference, including the impact of the regulatory environment on consumers, technological innovations in distribution and advised sales, global and European financial stability and the implications of a protracted low interest rate environment on insurers.  In particular, he noted that much work remains to be done in achieving consistent European supervisory standards and a coordination of insurance guarantee schemes across Europe. 

CBI releases voluntary survey on external credit ratings information
On 5 May 2016 the CBI emailed all Compliance Officers of Solvency II (re)insurers inviting them to complete a voluntary survey on external credit ratings information. The deadline for completion was 19 May 2016.

CBI Presentation – Solvency II in Practice
On 12 May 2016, the CBI published its presentation, Solvency II in Practice, which was delivered recently to Chartered Accountants Ireland.  The presentation consists of five sections, addressing (a) a recap on Solvency II, (b) an overview of the regulatory framework under Solvency II, (c) capital, (d) ORSA and (e) reporting.

Insurance Ireland publishes "Ireland for Insurance"
On 25 May 2016 Insurance Ireland published "Ireland for Insurance", a promotional publication regarding Ireland as an insurance hub. The publication outlines the advantages of doing business in Ireland, with a focus on Ireland's particular attractiveness as a location for international insurance organisations. Key factors identified by Insurance Ireland include a young and talented workforce, a high quality regulatory environment, a competitive corporate tax regime and a supportive environment for research, development and innovation. 
 

EUROPEAN

EIOPA launches 2016 EU-wide insurance sector stress test
On 24 May 2016, EIOPA announced the launch of the 2016 EU-wide stress test for the insurance sector. The 2016 test will be based on a sample of solo insurers and will assess the sector's vulnerabilities to a combination of market risk adverse scenarios focusing on (a) the prolonged low yield environment and (b) the so-called "double-hit" (negative market shock to asset prices combined with a low risk free rate).  EIOPA plans to publish Q&As on a weekly basis.  The deadline for submission of results to national supervisors is 15 July 2016.  Aggregated/anonymised results will be disclosed by EIOPA in December 2016.  To optimise efficiency, EIOPA will also collect information (required for Solvency II purposes) on equity and long term guarantee measures. 

Feedback to EIOPA's consultation on Solvency II treatment of infrastructure investment
EIOPA's Occupational Pensions Stakeholder Group (OPSG) recently commented on EIOPA's consultation paper on identification and calibration of 'other infrastructure investment' risk under Solvency II.  The OPSG is supportive of the separate identification of infrastructure assets.  However, it disagrees with certain perceived aspects of EIOPA's approach, e.g. not recognising actual exposure of insurers to risks (as it focuses only on risk emerging from volatility on artificial portfolios).  Additionally, on 19 May 2016, Insurance Europe responded to EIOPA's consultation on infrastructure corporates.  Amongst other matters, it highlighted concerns in relation to how capital requirements are calibrated and stated that available data underlying EIOPA's proposed calibration method relates mainly to public entities (and not the private deals in which insurers typically engage).

EIOPA publishes monthly technical information
On 11 May 2016, EIOPA published technical information on the relevant risk free interest rate term structures with reference to the end of April 2016 and on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of April 2016.  Additionally, on 31 May, EIOPA published updated technical information on the methodology used to derive the relevant risk free interest rate term structures; and these changes will be reflected in the June technical update.

European Commission Implementing Regulation on risk-free rate
On 27 May 2016, the European Commission published an Implementing Regulation on the risk-free rate under the Solvency II Directive. This confirms the technical information to be used (for calculation of technical provisions and basic own funds) for reporting with reference dates from 31 March to 29 June 2016.

EIOPA holds Solvency II workshop on public disclosure
On 12 May 2016 EIOPA held a workshop in London on financial reporting under Solvency II.  Amongst other matters, the workshop addressed (a) what to expect on the Solvency II balance sheet, (b) recognition and valuation of assets and liabilities, (c) how group solvency is calculated and (d) the benefits of Solvency II disclosures. The slides presented at the workshop are available on EIOPA's website.

EIOPA publishes peer review report on freedom of services
On 13 May 2016, EIOPA published a final report on its peer review on freedom to provide services (FOS) in the European insurance market.  The report (based on a reference period of 1 January 2011 to 31 December 2013) sets out key conclusions based on national supervisors' practices.  Recommended actions/improvements were identified in areas including: (a) data storage and record keeping; (b) exchange of information between home and host supervisors; (c) the identification of FOS risks by the home supervisor; and (d) complaints handling.   The recommendations may be actioned through amendments to the Siena Protocol.  

Joint statement on US-EU negotiations on insurance/reinsurance measures
On 27 May 2016, the European Commission published a joint statement on US-EU negotiations for a bilateral agreement relating to prudential (re)insurance measures. Amongst other matters this states that negotiations would continue in good faith on matters including group supervision and exchange of information (including confidential information) between supervisors and reinsurance supervision.

PRIIPS - Insurance-related commentary
Insurance Europe recently published a paper voicing concerns about certain aspects of the RTS for Packaged Retail and Insurance-based Investment Products Regulation (PRIIPS); and calling for the RTS to be amended.  Criticisms included the manner in which information regarding the cost and risk is to be presented to customers (in particular, in relation to inclusion of the biometric risk premium as part of the presentation of costs). This mirrored remarks made by the President of Insurance Europe at its recent 8th Annual International Insurance Conference. He warned that, when combined with other regulation, PRIIPS would result in consumers receiving unnecessary volumes of information which will make insurance products appear more expensive and risky than they are.  This follows the call, on 3 May, by certain European financial bodies (including Insurance Europe) for a one year delay in the application of PRIIPS.

EIOPA publishes revised sets of Q&As
On 30 May 2016 EIOPA updated its Question and Answer (Q&A) tool to include new sets of Q&As on its (a) Guidelines on reporting and public disclosure, (b) Guidelines on reporting for financial stability purposes, (c) Final report on the ITS on the templates for the submission of information to the supervisory authorities and (d) Final report on the ITS on procedures, formats and templates of the solvency and financial condition report.

Insurance Europe publishes industry database
On 13 May 2016 Insurance Europe published a database with figures, statistics and other information regarding the European Insurance industry (taking into account data from 2004 to 2014).  Amongst other matters, it includes information on (a) distribution channels, (b) benefits and claims paid and (c) the market structure of life, non-life and health insurance sectors in Europe.

Insurance Europe publish annual report
On 24 May 2016 Insurance Europe published its Annual Report for 2015-2016.  Items of note include details of its activities and commentary on PRIIPS and cross-border insurance.

EIOPA publishes year-end report 2015 and 2016 priorities
On 4 May 2016, EIOPA published its year-end report for 2015 on the functioning of colleges of supervisors. The main developments highlighted included (a) co-operation between colleges on internal models applications and (b) signing of co-ordination agreements. Unsurprisingly, in its Action Plan for 2016, its key focus will be harmonised and high quality Solvency II implementation.

For further information please contact a member of the Financial Regulation team. 

Date published: 03 June 2016