Ireland: Insurance Regulatory Update - June 2015

Last Updated: 12 July 2015
Article by Elizabeth Bothwell and Jennifer McCarthy
Most Read Contributor in Ireland, October 2018

IN DOMESTIC NEWS...

CENTRAL BANK PUBLISHES SOLVENCY II NEWSLETTER

On 30 June, the Central Bank published Issue 19 of its Solvency II newsletter, Solvency II Matters. The newsletter notes that all the Quantitative Reporting Templates (QRTs) submitted by the required High and Medium High impact firms successfully passed the Central Bank's initial taxonomy checks. The newsletter also reminds High and Medium High impact firms that they must provide quarterly data in respect of the third quarter of 2015 in November. In relation to the unsupported version of the Online Reporting (ONR) test environment for Low and Medium Low impact firms, the newsletter notes that the number of reporting errors has been increased to 100 which should assist firms in their preparations for Solvency II.

The Central Bank indicated that it is planning to review how certain undertakings' specific conditions of authorisation will be transitioned to the new Solvency II regime. The Central Bank will contact individual undertakings and provide an update in later editions of Solvency II Matters. The Central Bank is also reviewing its website materials in light of the requirements of the Solvency II regime.

The newsletter also provides an update on the activities of EIOPA, noting that when Set 2 of the Implementing Technical Standards were to be submitted to the European Commission at the end of June, and Set 2 of the Solvency II Guidelines are published in July, this will herald the finalisation of the regulatory framework for Solvency II.

Finally, the Central Bank stated that it will issue an industry survey in early September to assess the preparedness of the Irish insurance firms for Solvency II implementation.

A link to the newsletter is here.

CENTRAL BANK PUBLISHES APPLICATION FOR REVOCATION OF AUTHORISATION FOR INTERMEDIARIES

On 11 June, the Central Bank released the Application for Revocation of Authorisation/Registration of Investment, Insurance/Re-Insurance and Mortgage Intermediaries (the Application). The Instructions for Completion (the Instructions) emphasise the importance of completing the Application. Intermediaries are warned that they risk exposure to continued regulatory levies or other levies if they submit incomplete applications, as this will cause a delay in the processing of the revocation.

The Instructions warn of further consequences if a firm fails to complete the voluntary revocation process after it has been commenced. If this occurs, the Central Bank may initiate involuntary revocation procedures against the firm and will take an unfavourable view of both the firm and those involved in its management in respect of such failure. In this scenario the Central Bank indicates that it will take such regulatory action as it considers necessary.

The Application contains template letters which are to be sent to the firm's consumers and product producers in order to inform them of the decision to apply for revocation.

A link to the Application is here.

EUROPEAN UNION (INSURANCE UNDERTAKINGS: FINANCIAL STATEMENTS) REGULATIONS COME INTO OPERATION

The European Union (Insurance Undertakings: Financial Statements) Regulations 2015 (the Regulations) came into operation on 17 June. The Regulations give effect to Directive 91/674/EEC (the Insurance Accounts Directive) and revoke the European Communities (Insurance Undertakings: Accounts) Regulations 1996 (S.I. No. 23 of 1996).

A link to the Arthur Cox briefing in respect of the Regulations is here.

CENTRAL BANK PUBLISHES MACRO-FINANCIAL REVIEW

On 16 June, the Central Bank published its first Macro-Financial Review of 2015 (the Review). The Review summarises the current state of the macro-financial environment in Ireland by evaluating updates since the previous review (published in December 2014). As part of the Review, the Central Bank notes that despite the existence of a better operating environment as a result of the economic recovery, the insurance industry still faces significant challenges in both the life and non-life sectors.

The Review indicates that increased competition from other financial service providers is causing profitability issues for the non-life sector. While premium income from Irish-risk business rose by 5.3% compared to 2013 as both rates and volume increased, a number of high impact firms reported an underwriting loss in 2014. The Review also notes a slight depression in the solvency position of the non-life sector in 2014, however all firms have preserved their solvency ratio at a level above the minimum requirement of 150%.

According to the Review, the solvency position of most domestic firms in the life sector improved over the course of 2014. However, generating new business that is profitable over the long run has proved challenging and 2014 saw a 5.6% decrease in the retail protection segment and a 38% reduction in the investment segment of the life market. The Review also notes that the variable annuity (VA) sector continues to face difficult operating conditions as a result of the low interest rate environment.

The Review notes that the reinsurance sector has been profitable in recent years, generating €15.4 billion in gross written premium in 2014 (18% higher than in 2013). However, the outlook for the reinsurance sector has been rated negative by all of the major rating agencies as a result of challenges such as the oversupply of capacity and increased retention rates by primary insurers. There has been significant consolidation in this sector which is impacting some firms with substantial operations in Ireland.

A link to the Review is here.

IN EUROPEAN AND INTERNATIONAL NEWS...

EUROPEAN COMMISSION ADOPTS THIRD COUNTRY EQUIVALENCE DECISIONS UNDER SOLVENCY II

The EC adopted its first package of third country equivalence decisions (the Decisions) on 5 June. The countries referenced in the Decisions are Switzerland, Australia, Bermuda, Brazil, Canada, Mexico and the USA (Equivalent Countries). Switzerland is the only Equivalent Country granted full equivalence for an indefinite period in the three specific areas under Solvency II: (1) solvency calculation; (2) group supervision; and (3) reinsurance. The remaining Equivalent Countries were granted provisional equivalence for 10 years but only in one of the three areas, solvency calculation.

Where a third country is granted full equivalence, EU insurers with subsidiaries in that country can calculate the subsidiaries' capital and own funds using the solvency rules of that equivalent country. Provisional equivalence means that when EU insurers operate in those countries they can use local rules relating to capital and capital requirements rather than Solvency II rules, provided they use the "deduction and aggregation" approach for calculating their solvency requirements.

The European Parliament and Council now have three months to examine the Decisions, with the option to extend this for an additional three months. If approved, the Decisions will be published in the Official Journal and enter into force.

Links to the Decisions are here and here.

FOURTH MONEY LAUNDERING DIRECTIVE PUBLISHED

On 5 June, the Fourth Money Laundering Directive (MLD4) was published in the Official Journal following the publication of the first draft in February 2013. In February 2013, the European Commission identified the goals of MLD4 to be, inter alia: (1) to provide for a more targeted risk-based approach to supervision; (2) to clarify the rules on customer due diligence; and (3) to provide a clear mechanism for identification of beneficial owners.

The final text of MLD4 reflects the aims set out in February 2013 and includes a number of key provisions. These include requirements for entities to hold accurate information in respect of beneficial owners and explain the application of the simplified due diligence procedure. In addition, the scope of the types of individuals who can be regarded as politically exposed persons has been expanded; the definition of criminal activity has changed to include both direct and indirect taxes; clarification has been provided in respect of the exemption for those who provide financial activity on an occasional basis; an EU Financial Intelligence Unit must be established in each Member State; and additional provisions in MLD 4 set out more detail regarding supervision and enforcement/sanctions.

It is anticipated that MLD4 will be implemented in Ireland in June 2017.

A link to MLD4 is here.

EIOPA PUBLISHES ANNUAL REPORT 2014

On 26 June, EIOPA published its Annual Report 2014 (the Report). The Report summarises EIOPA's progress in the realisation of its strategic goals. EIOPA has identified these goals as: strengthening consumer protection, delivering quality and timely regulation, ensuring convergence, consistency and quality of supervision, supporting financial stability and developing as a modern and competent authority.

The Report indicates that EIOPA's primary achievements in 2014 in the insurance sector include its work on the Regulation of Packaged Retail and Insurance–Based Investment Products (PRIIPs), its work towards the implementation of Solvency II, the Stress Test of the European Insurance Sector, reporting on the equivalence of the insurance frameworks of Bermuda, Japan and Switzerland, publishing consultation and discussion papers on consumer protection issues and establishing a Supervisory Oversight Team which assessed 10 National Competent Authorities (NCAs) in 2014.

While detailing these achievements, the Report also identified the main challenge facing EIOPA as the imbalance between the tasks and resources which are allocated to it. In describing the management of these resources, the Report states that the efficiency of EIOPA's handling of operational and administrative functions has consistently improved.

A link to the Report is here.

INSURANCE EUROPE PUBLISHES ANNUAL REPORT 2014-2015

On 8 June, Insurance Europe published its Annual Report for 2014-2015 (the Report). The Report summarises developments in a large number of areas affecting the insurance industry in the previous 12 months. These include prudential regulation, investment issues, new global capital standards, the role of insurers in retirement savings, taxation and changes in financial reporting. The Report makes a number of high level suggestions to EU and international decision makers. The Report highlights the risk of information overload for consumers as a result of overlapping disclosure requirements in EU legislation, for example between PRIIPs, the Solvency II Directive, and the Insurance Mediation Directive (IMD2). The Report notes the insurance industry's concern that Solvency II will make it unnecessarily more expensive for insurers to invest, as a result of the changes to the way risks are measured. Insurance Europe expresses apprehension about proposed changes to the funding arrangements of the European Supervisory Authorities (ESAs) which would involve a move away from EU and national contributions, towards funding from the insurance industry. The Report also comments that the proposed EU data protection regulation threatens to disrupt insurers' ability to use data to underwrite business and prevent fraud.

The Report also summarises the performance of the insurance industry in 2014. The past year has seen a growth in Europe's economy and this is reflected in the insurance sector where total premiums grew on average by 4.2% and are valued at an estimated €1.176bn. This growth is primarily led by the life insurance market, where premiums grew by 6.4% in 2014.

A link to the Annual Report is here.

FCA PUBLISHES RESULTS OF THEMATIC REVIEW IN RESPECT OF DELEGATED AUTHORITY

On 2 June, the Financial Conduct Authority (FCA) published the results of its thematic review entitled 'Delegated Authority: Outsourcing in the General Insurance Market' (the Review). In producing the Review, the FCA examined the outsourced underwriting and claims handling arrangements of 12 insurers, and the associated activities of 19 intermediaries and third party administrators.

The Review noted that the definition of outsourcing includes, inter alia, the external delegation of underwriting authority and other significant functions such as claims handling. Firms sometimes describe other activities as 'delegated' which may not, in fact, involve delegation or outsourcing. The FCA's key concern is that there is a lack of clarity within firms as to their responsibilities when a task is outsourced which increases the risk that customers will not be treated fairly.

The FCA highlighted that many of the insurers and intermediaries included in the Review did not take appropriate steps to meet their regulatory obligations or assess the impact that outsourcing arrangements might have upon customers. In particular, the FCA identified a number of shortfalls by some firms including the areas of (1) assessing conduct risks; (2) carrying out due diligence to select third parties; and (3) controlling outsourced claims functions. In some instances, both insurers and intermediaries did not clearly allocate responsibility to either the insurer or intermediary; have an appropriate level of oversight and monitoring; or adequately handle complaints.

The FCA has indicated that firms should consider the findings of the Review to assess what changes might be necessary within their organisation. The next steps for the FCA include providing feedback to the firms included in the Review and engaging with other EEA regulators in respect of the findings of the Review.

A link to the Review is here.

EIOPA PUBLISHES FINANCIAL STABILITY REPORT

On 1 June, EIOPA published its Financial Stability Report (May 2015) (the Report), which covers the first quarter of the year. The Report provides an update on major risks to the financial stability of the insurance, reinsurance and occupational pension fund sectors. To a large extent the risks identified in the Report are consistent with those mentioned in EIOPA's previous Financial Stability Report, published in December 2014. These risks are: a weak macroeconomic climate, protracted low interest rates and increased credit risks.

The Report points to two major consequences of the euro area's quantitative easing (QE) policy which have caused issues for the insurance sector. First, the lowering of risk free rates has put the business models of some insurers and pension funds under increased strain. Moreover, the QE programme has the potential to reduce the market volume for some asset classes which heightens the volatility of their daily returns.

In response to the Report, the Chairman of EIOPA, Gabriel Bernardino commented that supervisors must monitor and challenge the industry, particularly in relation to the sustainability of their business models.

He also called for the industry to take action in respect of the weaknesses of 'in-force' business and suggested examining and possibly restructuring the mix of offered insurance products. He concluded by noting that 'the transitional measures included in Solvency II should be used to ensure a smooth transition to the new regime, avoiding disruptions in the market, while ensuring that firms will take the necessary steps to restructure their businesses.'

A link to the Report is here.

EIOPA PUBLISHES RISK DASHBOARD

On 8 June, EIOPA published its risk dashboard for the first quarter of 2015. The risk dashboard gives an overview of the overall situation in Europe, rather than by country. EIOPA notes that the risk environment remains difficult and that the profitability of insurance companies will continue to be challenged by the persistent low interest rate environment. EIOPA notes that market risks remain high and while there has been slight improvement in macro risks, it is still to be considered fragile. Liquidity and funding risks are still present and should be monitored, but are not currently a major issue.

A link to the risk dashboard is here.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions