IN DOMESTIC NEWS...
CENTRAL BANK PUBLISHES ANNUAL REPORT AND PERFORMANCE STATEMENT
On 27 April and 28 April, respectively, the Central Bank published its Annual Report 2015 and its Annual Performance Statement – Financial Regulation 2015-2016. The Annual Performance Statement summarises the Central Bank's financial regulatory activities during 2015 and those planned for 2016. Certain key activities carried out in 2015 and action points for the remainder of 2016 of interest to the insurance industry were highlighted:
- Administrative Sanctions Procedure: The Central Bank entered into nine Administrative Sanctions Procedure settlement agreements in 2015 and imposed a total of just over €7,333,000 in fines (although €5,105,000 of this was waived due to the to a lack of assets of those fined). On the basis of one of these settlement agreements the Central Bank disqualified one individual for ten years from being a person concerned in the management of a regulated financial service provider. This represents the longest disqualification period imposed by the Central Bank to date. The Central Bank used its power to refer Administrative Sanctions Procedure cases to Inquiry for the first time in 2015. The Central Bank is facing legal challenges relating to these referrals.
- Insurance supervisions: The Central Bank will carry out a themed review of the non-life insurance sector titled 'Private Motor Oversight and Governance' in 2016. This review will focus on the sustainability of premium levels within the market and the adequacy of pricing risk assessments carried out by firms.
- Solvency II and new internal structure: A key priority for the Central Bank in 2016 is to ensure that the new Solvency II regime is embedded effectively in the firms it supervises. The Central Bank is also embedding a new internal structure with dedicated sector focused supervision teams and has added two new teams: a dedicated on-site inspection team; and a dedicated analytics team.
- Cultural awareness and lower impact companies: In 2016, the Central Bank will also focus on cultural awareness of insurance firms such as boardroom dynamics, risk culture and conduct culture. The Central Bank will also move from a reactive to proactive approach to engagement and inspection of lower impact firms.
CENTRAL BANK PUBLISHES USER MANUAL FOR SOLVENCY II ONLINE REPORTING SYSTEM
On 1 April 2016, the Central Bank published a user manual titled "Online Report System - Solvency II XBRL File Upload User Procedure Documents - Insurance". The manual contains instructions for insurance undertakings for uploading XBRL files to the Central Bank of Ireland Online Reporting System under Solvency II.
Click here for a link to the user manual.
NATIONAL SPECIFIC TEMPLATE REPORTING REGULATION PUBLISHED BY CENTRAL BANK
On 11 April, the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Insurance Undertakings National Specific Templates Reporting Arrangements) Regulations 2016 were signed into law by the Central Bank. The Regulations set out the legal basis for submission of National Specific Templates to the Central Bank's Online Reporting System applicable to: (a) all life and non-life insurance undertakings with a high PRISM rating; (b) insurance undertakings transacting business in the state on a branch basis and whose Irish risk annual gross written premium exceeds €25,000,000; and (c) all (re) insurance undertakings which transact variable annuity business regardless of PRISM impact rating.
Click here for a link to the regulations.
CENTRAL BANK PUBLISHES 'DAY ONE' OPENING BALANCE SHEET RECONCILIATION REPORTING TEMPLATE FREQUENTLY ASKED QUESTIONS (FAQS)
On 14 April, the Central Bank published the FAQs which provide information for life and non-life (re)insurance firms on the 'Day One' Opening Balance Sheet Reconciliation Reporting template and also clarifies points made in previous correspondence to Compliance Officers in relation to Day One narrative reporting.
Click here for a link to the FAQ.
CENTRAL BANK PUBLISHES SOLVENCY II INFORMATION NOTE 9 – LOOK THROUGH OF COLLECTIVE INVESTMENT UNDERTAKINGS (CIUS) IN TEMPLATE S.06.03
This recently published Information Note sets out the Central Bank's position regarding completion of template S.06.03 in respect of CIUs by (re)insurers that encounter difficulty in providing the level of detail sought by the Solvency II Implementing Technical Standards on Supervisory Reporting. In EIOPA's Q & A regarding this template, it was asked whether it is possible to exclude certain CIUs for which the highest margin types (Type 2 Equities) have been applied in the Minimum Capital Requirement/Solvency Capital Requirement calculations from the report. Otherwise, the report requires all CIUs in the undertaking's portfolio at the reporting date to be disclosed and each CIU to be categorised according to underlying asset groups. EIOPA responded that the template is relevant to the supervision of the prudent person principle as well as Solvency Capital Requirement calculations so all CIUs or investments packaged as funds have to be subject to look through as described but "specific situations might be discussed with the national competent authority". In response, the Central Bank advises that all undertakings should make every effort to provide a full look through of their CIUs. However, if after best efforts they still cannot meet the standard required under Solvency II, they should complete the Q1 2016 report with best available data, providing a narrative submission to their supervisory team addressing the requirements set out in the Note. The Central Bank points out that they are not providing guidance on what constitutes a CIU or on materiality for the purposes of the disclosures required.
Click here for a link to the information note.
IN EUROPEAN AND INTERNATIONAL NEWS...
COMMISSION DELEGATED REGULATION (EU) 2016/467 PUBLISHED IN THE OFFICAL JOURNAL OF THE EU
Commission Delegated Regulation (EU) 2016/467 was published in the Official Journal of the EU on 1 April 2016 and entered into force on 2 April 2016. It amends Commission Delegated Regulation (EU) 2015/35 in respect of the treatment of infrastructure assets held by (re)insurance undertakings under Solvency II, specifically in relation to the calculation of regulatory capital requirements for those assets.
Click here for a link to the amending Commission Delegated Regulation (EU) 2016/467.
EIOPA CONSULTS ON PROPOSED AMENDMENTS TO IMPLEMENTING TECHNICAL STANDARDS ON SUBMISSION OF INFORMATION TEMPLATES AND EIOPA GUIDELINES ON REPORTING AND DISCLOSURE
As reported above, Commission Delegated Regulation (EU) 2016/467, amending Commission Delegated Regulation (EU) 2015/35 in relation to investment in infrastructure assets, entered into force on 2 April 2016. To take account of its amendments for the purposes of firms' reporting in relation to infrastructure, EIOPA has proposed amendments to Implementing Technical Standards on templates for the submission of information to the supervisory authorities (the ITS) as well as EIOPA's Guidelines on Reporting and Disclosure (the Guidelines). By doing so, it aims to ensure the annual quantitative reporting templates for 2016 reflect these changes and include relevant information for supervisory authorities.
The Consultation Paper offers background to EIOPA's proposals, sets out the amendments to the ITS (which include the correction of drafting errors) as well as the Guidelines and incorporates an Impact Assessment in the final section. EIOPA has also requested comments on a specific question related to amendments to the ITS in respect of European Long- Term Investment Funds. The deadline for responses to the consultation is 3 May 2016.
Click here for a link to the Consultation Paper.
INSURANCE EUROPE WARNS ABOUT MARKET ACCESS ISSUES FOR EU (RE)INSURERS
On 11 April 2015, Insurance Europe published a paper highlighting the key regulatory and market access issues for EU (re)insurers in the United States, Brazil, Ecuador, Indonesia, China, Argentina and Russia.
The primary focus of the paper is on market access issues faced by the EU (re) insurance industry when conducting business in these jurisdictions. For example, in the US, the paper notes key areas of concern for EU (re)insurers are US (re)insurance collateral, a proposal to limit the deductibility of reinsurance premiums retroceded to non US affiliates and the difficulties arising from dealing with multiple state based regulatory jurisdictions and requirements. The paper also comments that EU (re)insurers' competiveness in other jurisdictions remains dependent on the progress made in determining third country equivalence under Solvency II and notes that without action in the near future EU (re)insurers will not be able to appropriately take into account their operations in third countries for internal model calculations when calculating their Regulatory Solvency Capital requirements.
Click here for a link to the paper.
INSURANCE EUROPE COMMENTS ON PROPOSED REGULATORY TECHNICAL STANDARDS FOR PACKAGED RETAIL AND INSURANCE BASED INVESTMENT PRODUCTS (PRIIPS) REGULATION
Insurance Europe recently issued a press release on the draft Regulatory Technical Standards (RTS) for the PRIIPs Regulation which have been submitted by the European Supervisory Authorities to the European Commission. The RTS determine the presentation and content of the Key Information Document (KID) which is intended to provide consumers with a clear understanding of different investment products and is the central component of the PRIIPs Regulation. Insurance Europe has concerns regarding the draft KID. They comment that insurance based investment products provide insurance protection to investors that other investment products do not provide and state that as the draft KID does not explain this properly, it makes insurance based investment products seem more expensive than other products without pointing out the additional protection provided. Insurance Europe also comments that the draft KID misrepresents the risk of insurance based investment products as the PRIIPs Regulation requires one indicator that consumers can easily understand and the methodology used to derive this indicator are not fit for purpose for insurance based investment products and, as a consequence, overstate the risk of those products. Insurance Europe concluded by stating that the insurance industry needs sufficient time to programme, test and launch the KID correctly and as such a one year extension of the PRIIPs application date is required to ensure consumers get the best outcome.
Click here for a link to the press release.
INSURANCE EUROPE COMMENTS ON INSURANCE DIGITAL PRODUCTS AND SERVICES IN EUROPE
Insurance Europe published a briefing in relation to its response to the European Commission's Green Paper consultation on retail financial services and insurance digital products and services. Insurance Europe noted that the offering of cross border insurance is functioning well with over a third of insurance premiums written by foreign controlled subsidiaries or branches and that insurers are delivering an increased volume of digital products and services to meet consumer demand.
While digitalisation is influencing the way insurers innovate, distribute and interact with customers, it cannot remove all barriers to increasing the volume of cross border insurance. The reasons for this are several, including the fact that the design of insurance products reflects the regulatory, social and economic environment of the country in which they are sold and local market and regulatory conditions also have an impact and can make the portability of products difficult. The briefing concludes that the regulatory environment for insurance needs to ensure access to both digital and non-digital services remain available to avoid discriminating against people who prefer more traditional means for purchasing insurance.
Click here for a link to the briefing.
EIOPA CONSULTS ON TREATMENT OF INFRASTRUCTURE CORPORATES UNDER SOLVENCY II
EIOPA has issued a consultation paper relating to the European Commission's second call for technical advice in October 2015 on the identification and calibration of infrastructure corporates. EIOPA issued a call for evidence on the topic during November - December 2015 and held a roundtable discussion with interested stakeholders in February 2016. EIOPA acknowledges that further work is required before its advice can be finalised but the consultation offers an opportunity to gauge public reaction to its work to date.
The paper is split into ten sections. It includes an initial outline of the background to the consultation and covers a range of topics including a summary of EIOPA's analysis, preliminary results and conclusions, the case for infrastructure investments, the difference between infrastructure projects and corporates, scope and criteria for infrastructure corporates and risk management requirements. It concludes with EIOPA's impact assessment regarding infrastructure corporates.
Responses to the consultation are required by 16 May 2016 with a view to EIOPA publishing its final advice by the end of June 2016.
Click here for a link to the consultation paper.
EIOPA Q&A TOOL IS UPDATED IN AREAS OF GROUP SOLVENCY, REGULATORY REPORTING AND THE SOLVENCY AND FINANCIAL CONDITION REPORT
EIOPA publishes an update to its Q&A Tool on regulation providing new Q&A uploaded in April on the areas of EIOPA's guidelines on group solvency (six new questions), its final report on the ITS templates for the submission of information to the supervisory authorities (18 new questions) and its final report on the ITS on procedures, formats and templates of the Solvency and Financial Condition report (six new questions).
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.