Ireland: Insurance Quarterly Legal Update July-September 2017

INSURANCE QUARTERLY LEGAL AND REGULATORY UPDATE

Solvency II

(i) EIOPA issues consultation paper on the review of the Solvency II Delegated Regulation

On 4 July 2017, the European Insurance and Occupational Pensions Authority ("EIOPA") published a consultation paper on EIOPA's first set of advice to the European Commission on specific items contained in EU Regulation (EU) 2015/35 (the "Solvency II Delegated Regulation") (the "Consultation").

The Consultation is part of EIOPA's review of the Solvency II Delegated Regulation and, in particular, EIOPA's review of the Solvency Capital Requirement ("SCR") standard formula. This review started in 2016 with the first discussion paper issued in December 2016.

The main goals of the review are:

  • To ensure a proportionate and technically consistent supervisory regime for (re)insurance undertakings; and
  • To look for possible simplifications in the SCR standard formula and to ensure the proportionate application of the requirements.

The Consultation includes EIOPA's advice on the matters including simplified calculations, reducing reliance on external credit ratings in the standard formula, treatment of guarantees, exposure guaranteed by a third party and exposures to regional governments and local authorities, risk-mitigation techniques, the look-through approach on investment related vehicles, undertaking specific parameters, and the loss-absorbing capacity of deferred taxes.

EIOPA intends to finalise its advice regarding the items mentioned above in October 2017 and then submit this final advice to the European Commission.

The deadline for responses to the Consultation was 31 August 2017.

A copy of the Consultation is available here.

(ii) EIOPA submits amended ITS on reporting and disclosure under Solvency II and publishes final taxonomy version 2.2.0.

On 17 July 2017, EIOPA submitted draft amendments of the following implementing technical standards ("ITS") under EU Directive 2009/138/EC (the "Solvency II Directive") to the European Commission for endorsement:

  • ITS on the templates for the submission of information to the supervisory authorities ("ITS on reporting"); and
  • ITS with regard to the procedures, formats and templates of the solvency and financial condition report ("SFCR") ("ITS on disclosure").

The publication of amended versions of the above ITS follows EIOPA's April 2017 call for comments on the final draft of both ITS. The amendments also concern the Guidelines on Reporting for Financial Stability Purposes and the Guidelines on the Supervision of Branches of Third-Country Insurance Undertakings.

EIOPA expects that both ITS will be applicable at the end of 2017.

In order to align the legal basis and the taxonomy release, on 17 July 2017, EIOPA also released the final Data Point Model and Taxonomy version 2.2.0, including all relevant documentation and information on amendments and feedback received to the 2.2.0 Public Working Draft.

A copy of the final ITS on reporting is available here.

A copy of the final ITS on disclosure is available here.

Information on the Data Point Model and Taxonomy release can be found here.

(iii) ESAs publish consultation paper on revising the ITS on the allocation of credit assessments of ECAIs to an objective scale of credit quality steps under Solvency II

On 18 July 2017, the European Supervisory Authorities ("ESAs") published a consultation paper relating to proposed revised amendments to Commission Implementing Regulation (EU) 2016/1800 of 11 October 2016 laying down implementing technical standards with regard to the allocation of credit assessments of external credit assessment institutions ("ECAIs") to an objective scale of credit quality steps in accordance with the Solvency II Directive (the "Commission Implementing Regulation").

Under the Solvency II Delegated Regulation, (re)insurers may use an external credit assessment for the calculation of the SCR in accordance with the standard formula only where it has been issued by an ECAI or endorsed by an ECAI in accordance with the Credit Rating Agencies ("CRAs") Regulation (Regulation (EC) No. 1060/2009. The annex to the Commission Implementing Regulation set out the allocation tables for 26 ECAIs.

Since the Commission Implementing Regulation entered into force, ESMA has withdrawn the registration of one CRA and five additional CRAs have been recognised. Therefore, the Commission Implementing Regulation will need to be updated to reflect allocations for the newly established ECAIs and to remove the reference to the de-registered ECAI.

The Consultation Paper sets out the proposed revised draft ITS and the ESAs requested feedback on these draft ITS before 18 September 2017.

The Consultation Paper can be accessed here.

(iv) Solvency II Commission Implementing Regulation (EU) 2017/1421 on technical information for calculation of technical provisions and basic own funds published in the Official Journal of the EU

On 5 August 2017, Commission Implementing Regulation (EU) 2017/1421 of 2 August 2017 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 June 2017 until 29 September 2017 in accordance with the Solvency II Directive (the "Commission Implementing Regulation") was published in the Official Journal of the EU.

The Commission Implementing Regulation provides that (re)insurance companies must use the technical information on relevant risk-free interest rate term structures, fundamental spreads for the calculation of the matching adjustment and volatility adjustments referred to in Article 1(2) of the Commission Implementing Regulation when calculating technical provisions and basic own funds for reporting with reference dates from 30 June 2017 until 29 September 2017.

In order to ensure uniform conditions for the calculation of technical provisions and basic own funds by (re)insurance undertakings, the Commission Implementing Regulation states in the recitals that this technical information should be laid down for every reference date.

The Commission Implementing Regulation entered into force on 6 August 2017, applies from 30 June 2017 and is binding in its entirety and directly applicable in all Member States.

A copy of the Commission Implementing Regulation is available here.

(v) Irish Solvency II Amending Regulations published

On 25 August 2017, the European Union (Insurance and Reinsurance) (Amendment) Regulations 2017 (S.I. no. 384 of 2017) (the "Irish Solvency II Amending Regulations") were published.

The Irish Solvency II Amending Regulations make certain amendments to the European Union (Insurance and Re-insurance) Regulations 2015 (S.I no 485 of 2015) (the "Solvency II Regulations") in order to more accurately reflect the text of the Solvency II Directive (as amended).

More specifically, the Irish Solvency II Amending Regulations provide for changes in relation to the following areas:

  • Exemption for Third country reinsurance undertakings;
  • Transfers of reinsurance portfolios;
  • Authorisation and conditions of third country branches;
  • Fit and proper requirements for insurance holding companies and mixed financial holding companies; and
  • Disapplication of Sections 14 and 15 of the Insurance Act 1989 to Solvency II undertakings not in run-off.

A copy of the Irish Solvency II Amending Regulations can be found here.

(vi) Commission Delegated Regulation amending Solvency II Delegated Regulation on infrastructure corporates published in Official Journal of the EU

On 14 September 2017, the Commission Delegated Regulation ((EU) 2017/1542) of 8 June 2017 amending the Solvency II Delegated Regulation (EU) 2015/35 concerning the calculation of regulatory capital requirements for certain categories of assets held by insurance and reinsurance undertakings (infrastructure corporates) was published in the Official Journal of the EU (the "Amending Delegated Regulation").

The Amending Delegated Regulation is based on advice received from EIOPA in June 2016 and proposes amendments which reduce the capital charges attached to investments by insurance companies in infrastructure corporates where certain criteria are met, with the overall aim of promoting infrastructure investment in the EU.

The Amending Delegated Regulation entered into force on 15 September 2017.

The Amending Delegated Regulation can be accessed here.

(vii) EIOPA publishes second set of Solvency II statistics on EU insurance sector

On 18 September 2017, EIOPA published its second set of comprehensive statistical information on the EU insurance sector based on Solvency II reporting (the "EIOPA Solvency II Statistics").

The EIOPA Solvency II Statistics contain country breakdowns and distributions of key variables based on reporting from solo insurance and reinsurance undertakings for quarter 4 of 2016.The Solvency II Statistics also includes a set of indicators based on financial stability reporting for the largest European insurance groups and undertakings on an aggregated level.

The EIOPA Solvency II Statistics can be accessed here.

To view the full report please click here.

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.

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