1. SOLVENCY II
1.1 European Union (Insurance and Reinsurance) (Amendment) Regulations 2022 [S.I. No. 509 of 2022]
On 10 October 2022, the European Union (Insurance and Reinsurance) (Amendment) Regulations 2022 [S.I. No. 509 of 2022] (Regulations) were published. The Regulations, which became applicable on 19 October 2022, make a number of amendments to the European Union (Insurance and Reinsurance) Regulations 2015 [S.I. No. 485 of 2015].
The principal changes made by the Regulations are as follows:
- The criteria to be considered 'large risks' under classes 3, 8, 9, 10, 13 and 16 have been increased from a balance sheet total of €6.2m to €6.6m in assets and from a net turnover of €12.8m to €13.6m;
- The criteria to be met by an undertaking to avail of the exclusion for 'small undertakings' have been amended to increase the financial amounts applicable; and
- The absolute floor for the Minimum Capital Requirement has been
- €2.7m for a non-life insurance undertaking, including a captive insurance undertaking, except in the case where all or some of the risks included in one of classes 10 to 15 in Part 1 of Schedule 1 are covered, in which case the absolute floor shall be €4m.
- €4m for a life insurance undertaking, including a captive insurance undertaking.
- €3.9m for a reinsurance undertaking, except a captive reinsurance undertaking, in which case the absolute floor shall be €1.3m.
A copy of the Regulations is available here.
1.2 Report on the use of limitations and exemptions from Solvency II reporting during 2021 and Q1 2022
On 19 December 2022, the European Insurance and Occupational Pensions Authority (EIOPA) published its annual report on the use of limitations and exemptions from Directive 2009/138/EC (Solvency II) reporting during 2021 and Q1 2022 (the Report). The report highlights the limitations and exemptions from regular supervisory reporting under Solvency II, as granted by the national competent authorities (NCAs) to Q1 2022.
The report set out the following findings:
- Compared to the previous report, the same 11 NCAs granted limitations/exemptions to 671 individual undertakings in Q1 2022 reporting (compared with 669 in Q1 2021);
- Three NCAs, the same as in the previous report, granted limitations/exemptions from reporting item-by-item templates to 111 individual undertakings in 2021 with regard to annual reporting at the 2021 year end (compared with 113 in 2020);
- With regards to the quarterly reporting requirements at group level, four NCAs (two in Q1 2021) granted limitations and/or exemptions to 41 groups for Q1 2022 (compared to 27 in Q1 2021); and
- Two NCAs (the same as in 2020) granted limitations and/or exemptions from annual reporting to eight groups in 2021 (seven groups in 2020).
The report reinforces that proportionality is entwined with reporting requirements, reflecting the nature, scale and complexity of the risks inherent to the business. Embodying this, in Q1 2022, large undertakings reported around 10 templates while on average 5 templates were submitted by smaller undertakings.
A copy of the Report is available here.
1.3 Insurance Europe views on the integration of sustainability risks in Solvency II
On 21 December 2022, Insurance Europe published its views on the integration of sustainability risks in Directive 2009/138/EU (Solvency II). Insurance Europe states that it supports the European Commission in its proposal for incorporating sustainability risks into the review of Solvency II and provides a list of "Do's" and "Don'ts" for the proposed amendments to the framework.
The Insurance Europe publication can be access here.
2. EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITY (EIOPA)
2.1 Propriety of administrative, management and supervisory body members and qualifying shareholders
On 12 October 2022, EIOPA published a follow up report to the 2019 Peer Review, in which it describes to what extent NCAs have implemented the advised actions put to them as a result of the proprietary assessment of the Administrative Management and Supervisory Body (AMSB) members and qualifying shareholders.
The Report outlines that while the development of supervisory practices is still in progress in a number of countries, there has been improvement with regard to the fulfilment of the recommended actions. Out of the total 78 recommended actions issued to 28 NCAs, 47 have been fully fulfilled. Numerous reasons were given by NCAs in respect of the non-fulfilment of the recommended actions which included; lack of internal resources to work on the issue and socio-political issues following the COVID-19 pandemic which triggered additional tasks for supervisors.
The Central Bank of Ireland (Central Bank) was issued with a recommended action in the context of 'ongoing verification of operating condition in relation to proprietary (suitability) of qualifying shareholders'. In response to this recommendation, EIOPA found that the Central Bank developed a detailed and structured concept regarding the assessment of qualifying shareholders on a continuous basis, implementing a new process based on a risk-based and proportionate approach. Based on the assessment, EIOPA found the recommended action fulfilled.
The Report also notes that the majority of the best practices laid out on the 2019 peer review have for the most part been adopted by NCAs. EIOPA encourages NCAs who have not yet fulfilled the recommended actions to build upon the identified best practices in order to develop their national supervisory practices.
A copy of the Report is available here.
2.2 Methodology for assessing value for money in the unit-linked market
On 31 October 2022, EIOPA published its methodology for assessing value for money in the unit-linked market (Methodology). This follows the publication of the Supervisory Statement on Value for Money in November 2021, and is intended to ensure a consistent and convergent approach towards its implementation.
The Methodology is intended for the use of and support for the National Competent Authorities (NCAs) and aims to provide clarity for insurance manufacturers and distributors on the supervisory approach to addressing value for money risks when supervising product oversight and governance (POG) requirements.
The approach is divided into three layers:
- Market wide assessment (Layer I);
- Enhanced supervision (Layer II); and
- Assessment of Product Oversight and Governance (POG) documents (Layer III).
A copy of the Methodology is available here.
2.3 Proposal for an Insurance Recovery and Resolution Directive
On 10 November 2022, EIOPA published two staff papers to provide clarity on the proposal for an Insurance Recovery and Resolution Directive (IRRD) put forward by the European Commission (Proposal).
These staff papers come on the back of the EIOPA Staff Paper published in July 2022 which provided an overview of the proposal for an IRRD. The Proposal itself was published in September 2021 and is currently under consideration by the European Parliament and Council of the European Union.
The first staff paper answers frequently asked questions on the Proposal, providing an overview of the most relevant aspects of the proposal and is seeking to address questions regularly asked by interested stakeholders (FAQs). The FAQs answer 15 questions on the IRRD including;
- why the IRRD is needed;
- whether the IRRD is too similar to Directive 2014/59/EU (the Banking Recovery and Resolution Directive or BRRD);
- how Directive (EU) 2016/97 (the Insurance Distribution Directive or IID) and BRRD will interact; and
- which companies should be subject to recovery and resolution planning.
In the second staff paper, EIOPA conducts a comparative analysis of IRRD and BRRD to identify similarities and differences between the two legal texts. EIOPA considers that the similarities included are warranted since they concern areas where there is no need for sectoral specificities (e.g. cross-border resolution, penalties in case of law infringement etc.). On the other hand, important differences are foreseen regarding fundamental elements of recovery and resolution, such as resolution tools and preparation, which duly reflect the specificities of the insurance sector.
The FAQs on the IRRD is available here.
The staff paper containing the comparative analysis between IRRD and BRRD is available here.
The Proposal for the IRRD can be accessed here.
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