Ireland: Insurance Regulatory Update, August 2018

Last Updated: 10 September 2018
Article by Arthur Cox
Most Read Contributor in Ireland, October 2018

Domestic News – August 2018

CENTRAL BANK PUBLISHES SPECIAL EDITION OF INTERMEDIARY TIMES ON THE INSURANCE DISTRIBUTION DIRECTIVE (IDD)

On 13 August, the Central Bank published a special edition of the Intermediary Times regarding implementation of and compliance with the IDD, which will take effect on 1 October 2018. In particular, the Central Bank encourages firms to consider if their activities fall within the definition of "insurance distribution" which is contained in the European Union (Insurance and Reinsurance) Distribution Regulations 2018 (IDR) and is more expansive than the definition of "insurance mediation" contained in the current Insurance Mediation Directive. This is particularly relevant for website comparison operators and ancillary insurance intermediaries whose activities may fall within the scope of the IDR and may be required to register with the Central Bank.

Once commenced, the IDR will amend the Investment Intermediaries Act 1995 (IIA) to remove "insurance policies" from the definition of investment instrument. The Central Bank has clarified that if an insurance intermediary holds its IIA registration to provide insurance policies only, in addition to its IDR registration, it should voluntarily revoke its IIA registration by using the revocation form available on the Central Bank's website.

This edition of the Intermediary Times also discusses the enhanced conduct of business and transparency rules that will apply to insurance intermediaries under the IDR, such as rules on cross-selling, conflict of interests, tied agents and product oversight and governance. In particular, intermediaries are reminded of the requirement to hold ring-fenced professional indemnity that covers the whole territory of the Member States in which they operate or some other comparable guarantee against liability arising from professional negligence. EIOPA is currently in the process of reviewing the existing minimum PII levels, which are likely to be revised upwards upon completion of this review. Please see the June/July edition of Arthur Cox Insurance Regulatory Update for more information on EIOPA's regulatory technical standards on PII.

The Central Bank's special edition of the Intermediary Times is here.

FURTHER CONSULTATION ON THE RENEWAL OF POLICY OF INSURANCE REGULATIONS 2007:CP124

Following on from CP 114, the Central Bank has published a second consultation paper regarding proposed amendments to the Non-Life (Provision of Information) (Renewal of Policy of Insurance) Regulations 2007 (the Renewal Regulations). The consultation is seeking feedback from stakeholders regarding whether, for comparative purposes, insurers should be required to provide the previous year's premium in renewal documentation issued to clients. With regard to mid-term adjustments, the Central Bank is proposing one of two options be adopted:

  • Option 1: that the premium total from inception of the policy and the cost of any midterm adjustment(s) be provided separately, excluding fees or charges; or
  • Option 2: provide an annualised premium figure following mid-term adjustment, excluding fees or charges associated with the adjustment.

The consultation paper also includes details of the feedback received from the Central Bank's first consultation, CP114, as well as the Central Bank's responses to the stakeholder feedback and a draft of the proposed statutory instrument that will amend the Renewal Regulations. Following on from CP114, the Renewal Regulations will be amended to extend the renewal notification period for motor and other applicable classes of non-life insurance from 15 to 20 working days. The amended Renewal Regulations will also require motor insurers to provide the total premium, where appropriate, for each of the following policy options: a) comprehensive cover; b) third party, fire and theft cover; and c) third party only cover, if offered by the insurer.

All proposed amendments are expected to be made by Q4 of 2018 but a lead-in time of 12 months will be allowed for to facilitate system changes and to complete other mandatory regulatory developments.

The deadline for making submissions under CP124 is 14 September 2018.

The Central Bank's consultation paper is here.

THE PERSONAL INJURIES ASSESSMENT BOARD (AMENDMENT) (NO. 2) BILL 2018

The Personal Injuries Assessment Board (Amendment) (no. 2) Bill 2018 introduces some of the recommendations made in the Cost of Insurance Working Group's January 2017 Report on the Cost of Motor Insurance.  

The Bill contains 14 key amendments to existing PIAB legislation. Its aim is to strengthen PIAB's powers in certain areas and to make changes to deal with certain operational issues identified.

It is hoped that the proposed amendments will constrain legal costs in personal injury cases, facilitate shorter timelines for assessment and enhance compliance with the PIAB process.

The Bill and an explanatory memorandum are available here

CENTRAL BANK PUBLISHES AGGREGATE INSURANCE QRTS 2018

On 13 August, the Central Bank published the aggregated quarterly reporting templates (QRTs) and annual reporting templates of all Solvency II (re)insurers regulated by the Central Bank. The data is based on QRTs up to the period Q1 2018 and annual reporting templates up to year end 31 December 2017. The report covers both domestic and international business written by Irish authorised (re)insurers. Included in the report are aggregated statistics for: SCR coverage; risk profile; financial strength; investment holdings; and risk margin. The report also shows recent trends in gross written premiums, lines of business and technical provisions for life and non-life insurance and reinsurance.

The Central Bank's Aggregated Insurance QRTs 2018 report is here.

International News – August 2018

EIOPA PUBLISHES DISCUSSION PAPER ON NATIONAL INSURANCE GUARANTEE SCHEMES

EIOPA has published a discussion paper on Resolution Funding and National Insurance Guarantee Schemes (IGSs). The paper primarily focuses on IGSs across Europe and analyses the advantages of harmonisation of those schemes to varying degrees. It examines three options: which range from the current fragmented approach (where IGSs are quite different across different member states), a "middle-ground" European network of IGSs or a single European scheme.  EIOPA suggests that the "middle-ground" European network of IGSs would be both feasible and also preferable to the current fragmented approach. Stakeholders are invited to give their view on EIOPA's analysis of the issues with IGSs and specifically to comment on how a desired IGS should be funded.

The recurring theme through the paper is the scope of cover of the IGS. The questions cover themes such as the coverage of the scheme:  compensation and cover for the continuation of policies; geographical scope - home/host structure, a limitation to the range of policies/policyholders covered under the IGS and the introduction of monetary caps to recovery. The paper also considers the broader question as to whether there is a need to harmonise national insolvency regimes. Stakeholders are invited to submit their comments on the paper before 26 October 2018 – The discussion paper can be found here.

INSURANCE EUROPE WRITES TO EU COMMISSION AND BRITISH AUTHORITIES REGARDING POST-BREXIT TRANSFER OF PERSONAL DATA

Insurance Europe has called for legal certainty on the transfer of personal data post-Brexit.  In particular, it suggests that an adequacy decision under Article 45 of GDPR should be adopted to ensure transfers of personal data between the UK and the EU/EEA can continue after Brexit.

The letter to the Commission, which is also signed by DigitalEurope, the Trans-Atlantic Business Council and European Association of Craft, Small and Medium-Sized Enterprises urges the Commission to launch an adequacy assessment process as soon as possible and to put interim measures in place if a decision cannot be finalised in time.

The letter to the British Authorities calls on Britain to ensure that it meets the conditions necessary to ensure an adequacy decision can be reached quickly.  The press release can be found here.

EUROPEAN COMMISSION SEEKS TECHNICAL ADVICE ON SUSTAINABLE FINANCE

On 1 August, the European Commission published a letter to EIOPA and ESMA (dated 24 July 2018) seeking technical advice on the potential amendments to, or the introduction of new delegated acts under, the Solvency II Directive, the UCITS Directive, AIFMD, MiFID and the IDD to integrate sustainability risks (i.e. environmental, social and governance risks) into financial services providers' decision making process and systems. The request follows the adoption by the European Commission of several legislative proposals on sustainable finance on 24 May 2018, including a proposal for Regulations on disclosures relating to sustainable investments and sustainability risks and also the establishment of a framework to facilitate sustainable investment (see Article below where Insurance Europe has commented on these proposed Regulations). 

In the interest of cross sectoral consistency, EIOPA and ESMA are invited to consider whether a new level 2 measure is required under each of the relevant Directives. EIOPA and ESMA are to provide their final technical advices, including a cost-benefit analysis to the Commission by 30 April 2019. The European Commission's letter is here.

EIOPA PUBLISHES REPORT ON UNDERSTANDING CYBER INSURANCE

The increasing number of cyber incidents, the continued digital transformation and new regulatory initiatives in the European Union are all factors that have boosted the demand for cyber insurance in recent years.

This report is based on a survey containing a set of 14 qualitative questions answered by 13 (re)insurance groups located in Switzerland, France, Italy, Germany and the United Kingdom.  Its key finding is the clear need for an improved understanding of cyber risk.  This is particularly important in the European market where most work to date has been in the US.  The outcome of the dialogue provides insights on the functioning, growth potential, challenges and risks of cyber insurance in Europe.

EIOPA's press release may be found here and the report may be found here

INSURANCE EUROPE COMMENTS ON PROPOSAL FOR REGULATION TO ESTABLISH FRAMEWORK FOR SUSTAINABLE INVESTMENT

Insurance Europe has provided comments on European Commission proposals for a regulation to establish a framework to facilitate sustainable investment and a regulation on disclosures relating to sustainable investments and sustainability risks. 

The position papers note that insurers are the largest institutional investor in Europe.  The increasing number of insurance companies voluntarily committing to sustainability objectives confirms that a transition towards sustainability is already taking place. 

Insurance Europe welcomes the recommendations of the EC High Level Expert Group Report and Action Plan on Financing Sustainable Growth and, in particular, various aspects of the Commission's proposal including the proposed criteria to establish environmental sustainability on the basis of economic activities.  The paper on establishment of a framework also recommends that other elements should be included in a unified classification system including a holistic approach to sustainability that includes all environmental, social and governance factors contributing to sustainable investments.  The paper also recommends that regulatory requirements related to the classification system should remain voluntary until all aspects of the taxonomy are sufficiently developed. 

The paper highlights the link between sustainability and long term investment and urges the implementation of measures to remove obstacles to investment in sustainable projects including the existing barriers to long-term investments contained in Solvency II.  The position paper can be found here

In the parallel position paper relating to disclosures for sustainable investments and sustainability risks, which can be found here, Insurance Europe welcomes the increased availability of information on sustainability under the proposal but identifies a number of changes required including the clarification of concepts such as "impact" and "sustainability risks". 

EIOPA PUBLISHES THIRD PAPER IN A SERIES ON SYSTEMIC RISK AND MACROPRUDENTIAL POLICY IN THE INSURANCE SECTOR

EIOPA published the third paper in a series on strategies to mitigate systemic risk through macroprudential policy in the insurance sector.

The first paper focused on the sources of systemic risk in insurance and proposed a specific macroprudential framework for the sector.  The second paper identified, classified and provided a preliminary assessment of tools or measures already existing within the Solvency II framework, which could mitigate the systemic risk sources that were previously identified.

This third paper now builds on and supplements that work by carrying out an initial assessment of other potential tools or measures to be included in a macroprudential framework for insurers.  The paper focuses on four categories of tools aimed at reducing systemic risk: (a) capital and reserving-based tools; (b) liquidity-based tools; (c) exposure-based tools; and (d) pre-emptive planning.

EIOPA's main findings and observations in respect of each of the four categories of tools are also included.  This initial assessment is the first step of the evaluation process, which may possibly lead to a specific instrument being adopted in the future.

EIOPA's press release may be found here and the third paper is here.

SUSTAINABLE INSURANCE FORUM (SIF) RAISES AWARENESS OF CLIMATE RISK FOR INSURANCE SECTOR

The SIF (of which EIOPA is a member) together with the International Association of Insurance Supervisors, has recently published a paper to raise awareness of the challenges presented by climate change.

The paper includes an overview of how climate change is affecting (and may affect) the insurance sector and explores supervisory approaches to addressing risks arising from climate change.

EIOPA's sustainable action plan, expected to be released in autumn this year, will consider the issues raised in more detail.  The press release may be found here. The SIF and IAIS paper on climate change risks to the insurance sector may be found here.

INSURANCE EUROPE RESPONDS TO FATF CONSULTATION ON RISK-BASED APPROACH GUIDANCE FOR THE LIFE INSURANCE SECTOR

Insurance Europe has responded to the Financial Action Task Force's public consultation on its "risk-based approach" draft Guidance to combating money laundering and terrorist financing for the life insurance sector. 

The response includes, in particular, comments on Section II of the draft Guidance for the private sector.  It also suggests the removal of annexes on non-life insurance and reinsurance and references to the IAIS Insurance Core Principles, which are under review. 

The draft guidance can be found here and the Insurance Europe response is published 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.

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