Ireland: Insurance Regulatory Update, September 2018

Last Updated: 12 October 2018
Article by Arthur Cox
Most Read Contributor in Ireland, September 2018

Domestic News

SEPTEMBER 2018

CENTRAL BANK PUBLISHES QUARTERLY NEWSLETTER

The newsletter provides an update of the activities of the Insurance Directorate in Q3 2018. It includes the Central Bank's final article in its four part series on risk culture, which focuses on decision making. The quarterly newsletter also includes details of forthcoming changes to the Solvency II reporting requirements, including amendments to the Central Bank's national specific templates (NSTs). The revised versions of the NSTs and a revised list of taxonomy validations will be published by the Central Bank on 18 October.

Feedback is provided from a questionnaire on IFRS17 preparedness, issued by the Central Bank to all high, medium-high and medium-low impact firms and a sample of low impact firms. The IFRS 17 is the new accounting standard for insurance contracts, and will replace IFRS 4 on 1 January 2021, although firms will be required to prepare their accounts in light of IFRS 17 from 1 January 2020 for comparative purposes. 45% of firms have taken no steps in developing their board's understanding of IFRS 17, with high impact firms fairing the worst in this respect; 62% of firms intend to use existing IT infrastructure and platforms to implement IFRS 17; and 56% of firms identify the development of IT infrastructure as the main challenge they face ahead of the new standard coming into effect. The Central Bank encourages firms to ensure appropriate planning arrangements and governance structures are put in place to mitigate risk and facilitate a smooth transition from IFRS 4 to IFRS 17.

INSURANCE IRELAND-PWC CEO PULSE SURVEY 2018

The 2018 Insurance Ireland-PwC CEO Pulse Survey was published on 11 September and contains the opinions of Irish CEOs on the trends in the Irish insurance industry and their views on the outlook for the market.

Confidence – Ireland continues to be one of the highest performing economies in the EU. 83% of Irish insurance CEOs are confident about business growth in the year ahead. Globally, 90% of insurance leaders are confident about their own revenue growth. Irish CEOs plan to hire more people and see more opportunities in the current market. The demand for cyber insurance is expected to rise.

Emerging Technologies – the research suggests that data analytics is, by far, the emerging technology providing the single greatest opportunity, with InsurTech following in as the second greatest opportunity. Irish CEOs are focussing in on other sources of opportunities from technology such as AI, robotics, IoT and blockchain.

Disruption and Challenges – 66% of Irish CEOs consider there are more threats to business growth than three years ago. Irish CEOs expect disruption from emerging technologies, changes to industry regulation, Brexit and changes in consumer behaviour due to GDPR. 

CENTRAL BANK GUIDANCE NOTE ON COMPLETING AN APPLICATION FOR AUTHORISATION AS A RETAIL INTERMEDIARY

The Central Bank has published a guidance note on completing an application for authorisation as a retail intermediary (Guidance), which replaces the existing guidance.

The Guidance sets out the principal areas that are assessed by the Central Bank in considering an application for authorisation as a retail intermediary. The Central Bank lists the documentation required to make an application and provides a summary of the key stages of the application process together with practical tips on submitting the application. It also provides guidance to applicants in relation to the specific questions set out in the application form.

The Central Bank cautions that there should be no significant changes made to the application submitted during the course of the application process, and where such changes are made, the applicant will be required to submit a new application.

Applicants are advised to seek independent legal advice if they are in any doubt as to the scope or application of the relevant legislation to their particular activities before making an application for authorisation. 

COMMENCEMENT ORDER SIGNED FOR PART 4 OF THE INSURANCE (AMENDMENT) ACT 2018

On 13 September the Minister for Finance signed a Commencement Order appointing 1 December 2018 as the day on which Part 4 of the Insurance (Amendment) Act 2018 comes into operation. Part 4 of the Act relates to the establishment of the Motor Insurers Insolvency Compensation Fund (MIIC Fund).  It provides a legal basis for motor insurers operating in the Irish market to contribute an amount equivalent to 2% of gross written motor premiums to the MIIC Fund. Part 4 also sets out the circumstances in which payments will be paid out of the MIIC Fund to the Insurance Compensation Fund and provides that, in the event of an insurer failing to make a contribution, the MIBI may refer the matter to the Central Bank for regulatory action and seek to recover the debt.  Failing to make a contribution is a criminal offence. 

Further information on the Act can be found in the June/July 2018 Arthur Cox Regulatory Group Update.

CENTRAL BANK SUBMISSION TO THE FINANCE COMMITTEE ON THE CONSUMER INSURANCE CONTRACTS BILL 2017

In July 2018, the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach (the Finance Committee) invited written submissions on the Consumer Insurance Contracts Bill 2017 (the Bill).

In its submission, the Central Bank states its support for a number of the measures in the Bill that would enhance the rights of consumers. In particular, the Central Bank supports the provisions of the Bill that clarify the responsibilities of the parties involved in the insurance contracts, and the provisions that make the claims process more fair and straightforward.

The Central Bank stresses the importance of a cost-benefit analysis, and submits that such an analysis is required on the measures proposed in the Bill. The Central Bank also believes that the Bill should include specific roles for the Financial Services and Pensions Ombudsman, and the Personal Injuries Assessment Board and that both entities' views should be sought on the drafting of the reforms set out in the Bill.

The Central Bank cautions that a number of proposed measures in the current version of the Bill are already addressed in domestic and European insurance legislation, including the Consumer Protection Code, and the introduction of the Bill may lead to overlap or inconsistencies. 

The Central Bank offered to the Finance Committee suggested drafting and technical amendments to the Bill.

COST OF INSURANCE WORKING GROUP PUBLISHES SIXTH PROGRESS UPDATE

The update reports an 82% completion rate for implementation of the deadlines set out in the action plans of the Report on the Cost of Motor Insurance published in January 2017 and the Report on the Cost of Employer and Public Liability published in January 2018 which aim to tackle high premiums, reform the insurance sector and combat insurance fraud.

The action plans recommend measures that are designed to meet several objectives including: protecting the consumer; improving data availability and personal injuries claims environment; and reducing costs in the claims process. 

The current status of each of the measures identified in the action plans is described in the update.

CENTRAL BANK ACT 1997 (AUDITORS ASSSURANCE) (AMENDMENT) REGULATIONS 2018

On 24 September, the Central Bank Act (Auditors Assurance) (Amendment) Regulations 2018, S.I. No. 373 of 2018 were commenced and published in Iris Oifigiúil. The Regulations amend the schedule of the Central Bank Act 1997 (Auditor Assurance) Regulations 2014 to prescribe additional obligations imposed by financial services legislation for the purpose of section 27BA of the Central Bank Act 1997.

International News

SEPTEMBER 2018

DELEGATED REGULATION REGARDING CALCULATION OF CAPITAL REQUIREMENTS FOR SECURITISATIONS ENTERS INTO FORCE

Securitisation Regulation (EU) 2017/2402, which is part of the capital markets union action plan, entered into force on 17 January 2018 and applies from 1 January 2019.  As the Securitisation Regulation amends the Solvency II Directive, the Solvency II Delegated Regulation (EU) 2015/35 also requires amendment to ensure consistency.  Commission Delegated Regulation (EU) 2018/1221 achieves this by aligning the securitisation provisions of Solvency II Delegated Regulation (EU) 2015/35 with the regulatory framework for securitisation from 1 January 2019.  It includes the alignment of definitions relating to securitisation; the deletion of provisions relating to risk retention and due diligence; new calibrations for simple, transparent and standardised securitisations; and transitional measures in respect of existing investments in securitisation.

ECB ISSUES OPINION ON ESTABLISHMENT OF NATIONAL INSURANCE CLAIMS DATABASE

In response to a request from the Minister for Finance, the European Central Bank gave an opinion on the draft Central Bank (National Claims Information Database) Bill 2018 addressing the additional responsibilities given to the Central Bank under the Bill and how those responsibilities will be financed.

The draft Bill proposes that the Central Bank will collect and study data from insurers relevant to costs of non-life insurance claims and its effect on the pricing of motor insurance.  It also provides for the Central Bank to make regulations prescribing levies to be paid by insurers and to identify the circumstances in which risks will be regarded as located in the State. 

The ECB's opinion sets out the role of the Central Bank as set out in the draft legislation.  The ECB considered the additional tasks that will be undertaken by the Central Bank under the draft Bill and concluded that, since these tasks are not connected to the Central Bank's role in the supervision of insurers or statistical reporting and only indirectly connected to its consumer protection role, the Bill should be amended to clarify that any shortfall in the funds available to defray the Central Bank's expenses should be met by the Minister and not from the Central Bank's own funds. 

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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