On 28 January 2021, EIOPA published the 'Single Programming Document-2021-2023, including Annual Work Programme 2021, Guiding EIOPA towards a New Normal' (Programme). In 2021, EIOPA recognises that COVID-19 crisis management, risk mitigation and active support to the recovery of the EU will be their focus for the foreseeable future. EIOPA will also prioritise focusing on digitalisation, sustainable finance and contributing to consistent and high-quality supervision, as well as the protection of consumers.
The Programme also highlighted key areas of focus for EIOPA (which mirror the areas of focus in the Annual Work Programme). Some of these areas include:
- cyber insurance
- conduct of business regulation and supervision
- leading supervisory convergence towards a high-quality prudential supervision throughout the EU
- strengthening the financial stability of the insurance and occupational pensions sectors
- delivering EIOPA's mandate effectively and efficiently
Many of the key areas of focus incorporate sustainable finance objectives. EIOPA aims to foster supervisory convergence across the EU in the assessment of environmental, social and governance (ESG) risks, and promote standardised information to identify sustainable investments and ESG risks.
Digitalisation has accelerated dramatically due to COVID-19. EIOPA acknowledges that it must strike a balance between establishing a convergent and sound supervisory approach to digitalisation and enhancing financial innovation as well as ensuring well-functioning consumer protection and financial stability frameworks.
Accordingly, EIOPA will focus on:
- big data analytics, including AI, machine learning capabilities and supervisory responses to this, including digital ethics in insurance;
- assessing the impact of and supervisory response to new technologies and business models enabled by technological changes (e.g. distributed ledger technology/blockchain, emergence of insurance platforms and ecosystems and Open Finance/Open Insurance);
- SupTech to deliver innovative and efficient supervisory solutions that will support a more effective, flexible and responsive supervisory system; and
- starting the preparatory work for the implementation of the digital operational resilience act.
EIOPA will promote the development of a sound cyber-insurance market to enable the digital economy by:
- identifying appropriate cyber
underwriting and cyber risk management practices;
promoting suitable supervisory practices;
- developing mitigation tools to address potential systemic cyber and extreme risks;
- fostering a mutual understanding between policyholders and insurers of the contractual conditions and terms; and
- promoting an adequate level and quality of data on cyber incidents to be made available at European level.
Conduct of Business Regulation and Conduct Supervision
EIOPA strives to:
- increase their emphasis on conduct oversight and supervisory convergence, including through conduct aspects of co-operation platforms, conduct country visits, and work with national conduct authorities on conduct supervisory handbook chapters;
- strengthen the tools for monitoring and reporting consumer trends and conduct risks to ensure a risk-based approach to conduct supervision;
- input into the review of both the Insurance Distribution Directive and packaged retail and insurance-based investment products frameworks; and
- start registering pan-European pensions products and overseeing their supervision.
Leading Supervisory Convergence towards High-Quality Prudential Supervision throughout the EU
EIOPA recognises that high-quality prudential supervision is instrumental for a well-functioning internal market. Additionally, working towards achieving supervisory convergence is of great importance to EIOPA.
To achieve these strategic priorities, EIOPA will:
- work on further implementing a common supervisory culture and continue to define common benchmarks for supervisory practices in the Supervisory Review Process;
- continue to contribute to the Solvency II review and assist in the effective implementation of the Institutions for Occupational Retirement Provision ('IORP II') Directive;
- employ new technologies and further develop their existing tool to enhance the effectiveness of cooperation between home and host supervisors regarding cross-border business; and
- further advance their business intelligence and data analytics framework for the supervisory community.
Strengthening the financial stability of the insurance and occupational pensions sectors
Increased risk monitoring at EU-level is necessary due to COVID-19. EIOPA will monitor and aim to identify risks early. Once risks are identified EIOPA will recommend mitigating actions for the stability of the insurance and occupational pensions sectors.
EIOPA plans to:
- strengthen the financial stability of the insurance and occupational pensions sectors by developing and using enhanced data in relation to emerging risks e.g. cyber risk;
- improve the accessibility of data in relation to risk;
- promote the EU approach in international approaches to assessing systemic risk; and
- improve the methodological framework for bottom-up stress tests – including integrating ESG factors, cyber and liquidity risk.
Delivering EIOPA's mandate effectively and efficiently whilst remaining adaptable to new priorities and demands
EIOPA will continue its efforts to ensure efficient and effective administration. These efforts include:
- continuing streamline processes to increase EIOPA'S responsiveness to change; and
- ensuring it is fulfilling its corporate social responsibility obligations e.g. reduce its environmental impacts.
It is clear from the number of updates in the Programme that the insurance industry is now in a period of sustained change and development. We will continue to monitor the progress in this area.
If you would like to know more about the services we offer or have any questions about the Programme, please contact the Insurance team or your usual contact at William Fry.
Contributed by Shannon O'Neill
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