EIOPA Update

IMD2 and Solvency II – The road to better policyholder protection and financial stability 

At a workshop in Brussels on 31 January 2013, Chairman of EIOPA, Gabriel Bernardino, expressed his views on the current challenges in revising the insurance regulatory framework, particularly with regard to IMD2 and Solvency II. He also remarked on some of the ways to achieve further consistency of EU regulation and supervision.

In relation to IMD:

• He welcomed the review of the Insurance Mediation Directive and the publication of the Commission's proposal to recast the existing Directive;
• He stated that EIOPA supports the Commission's objectives of making retail insurance markets work better and promoting a more level playing field by, for example, extending the scope of the Directive to include direct sales by insurers;
• He recommends certain amendments to IMD2 in relation to (i) the transparency of remuneration, (ii) comparison websites, (iii) the definition of "advice", (iv) freedom to provide services/freedom of establishment, (v) cross-selling and (vi) insurance PRIPs.

In relation to Solvency II:

• He acknowledges that challenges, including the effects of the financial crisis, are still creating uncertainties on the final design and calibration of Solvency II;
• He explains that EIOPA has taken a number of steps in preparing for Solvency II, including the launch of the long-term guarantee assessment and the planned introduction of Guidelines to prepare supervisors and firms for the new regime;
• He emphasises the importance of ensuring consistency of supervisory practices and states that EIOPA intend to develop a Supervisory Handbook to foster the implementation of a more consistent framework for the conduct of supervisors.

Please click here for the full text of the speech 

Consultation Paper on Complaints Handling launched 

EIOPA has launched a public consultation on Guidelines regarding complaints-handling by insurance intermediaries, such as insurance brokers. The Guidelines follow the previous publication of guidelines on complaints-handling by insurers, thereby aiming to ensure a complete circle of protection for consumers in this area.

The Guidelines set down guidance in relation to:

• appropriate internal systems and controls for complaints-handling;
• the provision of information; and
• procedures for responding to complaints.

The Guidelines are addressed to national competent authorities who would comply with the Guidelines by incorporating them into their national regulatory or supervisory framework. The Guidelines establish a minimum level of supervisory convergence by setting down high-level principles regarding the arrangements under which insurance intermediaries handle complaints. This helps to create a level playing field for insurance intermediaries across the EU and ensures fair treatment of complainants by insurance intermediaries.

The Draft Report contains a list of best practices for handling complaints by insurance intermediaries for the purpose of enhancing customer protection.

EIOPA invites submissions from all interested parties before the public consultation ends on 28 June 2013.

Please click here to view the consultation documentation including the Draft Report.

Discussion paper on long-term investments published 

EIOPA has published a Discussion Paper on Standard Formula Design and Calibration for Certain Long-Term Investments. The publication follows a request from the European Commission for EIOPA to examine whether the calibration and design of regulatory capital requirements for insurers' long-term investments in certain asset classes under the Solvency II regime necessitates any adjustment or reduction under the current economic conditions, without jeopardizing the prudential nature of the regime.

EIOPA has already completed an in-depth analysis of certain asset classes and the Discussion Paper summarises these preliminary findings and contains specific questions for stakeholders. Feedback provided by interested stakeholders will assist EIOPA in producing an informed recommendation on the review of the design and calibration of the standard formula in relation to the asset classes considered. EIOPA will also examine the influence that the maturity of insurance liabilities has on regulatory capital requirements for long-term investments. In addition, EIOPA will analyse non-regulatory obstacles for long-term investments by insurers.

EIOPA invites submissions from all interested parties before 28 May 2013, with a final report to be published in early July. The report will also take into account the results of the Long-Term Guarantee Impact Assessment. Combining the results of these two important pieces of work allows for a full examination as to whether the regulatory framework of Solvency II should be amended to facilitate long-term investments.

Please click here to view the full text of the Discussion Paper.

Prolonged low interest rate environment poses real challenge for insurers

On 4 March 2013, EIOPA published an Opinion on Supervisory Response to a Prolonged Low Interest Rate Environment.

In summary, the Opinion states as follows:

• A persistent low interest rate environment poses real challenges to insurers, particularly to those offering guaranteed rates of return to policyholders. Low interest rates may encourage other business model changes such as alterations in asset allocations in a "search for yield", which may create new risks on the asset side of the balance sheet;
• EIOPA recommends a coordinated supervisory response in terms of the assessment of future solvency and systemic stability problems and the design and timing of market-wide measures;
• National Supervisory Authorities are encouraged to actively engage with insurers in promoting private sector solutions to address the impact of persistently low interest rates;
• Insurers should carefully consider the impact that their solutions may have on consumers. A fine balance must be achieved in ensuring that consumers are treated in a fair and equitable manner, while also addressing the impact of a prolonged period of low interest rates on insurers.

Please click here for the full text of the Opinion.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.