This is the February 2015 edition of the Arthur Cox Insurance Regulatory Update, the monthly bulletin of the Arthur Cox Insurance Group. The Update contains a summary of recent developments in insurance regulation, law and practice.

This Month's News:

  • Central Bank Publishes Solvency II Newsletter
  • Central Bank Publishes Enforcement Priorities For 2015
  • Central Bank Publishes Intermediary Times
  • Central Bank Publishes Consumer Protection Outlook Report
  • Financial Services Ombudsman Publishes Annual Review 2014
  • The Insurance Act 2015 Receives Royal Assent
  • PRA Details Its Approach To The New Senior Management Accountability Regime
  • EIOPA Issues 1st Set Of Solvency II Guidelines And Outcomes Of Public Consultations
  • EIOPA Publishes Final Report On Public Consultation On The Draft Technical Advice On Conflicts Of Interest In Direct And Intermediated Sales Of Insurance-Based Investment Products
  • Insurance Europe Publishes Final Response To The ESA's Discussion Paper On The KID For PRIIPs
  • EIOPA Publishes Opinion On Sales Via The Internet Of Insurance And Pension Products
  • EIOPA Publishes Year-End Report On Functioning Of Colleges And Accomplishments Of Action Plan 2014


Central Bank Publishes Solvency II Newsletter

On 27 February, the Central Bank published the latest edition of its newsletter 'Solvency II Matters'. The Newsletter covers Solvency II developments at a European and domestic level since October 2014, many of which have been reported in previous editions of the Insurance Regulatory Update.

Given Solvency II's implementation deadline of 1 January 2016, the Central Bank highlights that this and future editions of 'Solvency II Matters' will contain important information for firms. The Central Bank has included a checklist at the end of the Newsletter summarising some of the key actions firms should take regarding Solvency II. In addition, the Central Bank intends to hold a Solvency II industry event on 20 April, and aims to use that as a means of sharing updates with the industry.

On the domestic front, the Newsletter provides an update on Solvency II data and reporting. The Central Bank reminds High and Medium High impact firms and groups to submit Solvency II reporting data during 2015. The Central Bank will receive these returns, for year-end 2014, between the middle of May and 3 June 2015. Also, the Central Bank's IT Division will test the Online Reporting system that will receive preparatory returns, and firms will be able to able to test their processes by conducting a 'test' submission. We have included a link to the Central Bank's note on the testing process.

In terms of 'phasing-in approvals', the Central Bank notes that from 1 April, it should have the power to decide on a number of 'early approvals'. The Central Bank published a separate document outlining its approach to three application processes: (1) Internal Models, (2) Ancillary Own Funds and (3) Article 95 Own Fund items (including Capital Contributions). We have included a link to this information document below.

On the European front, the Central Bank notes the publication of EIOPA's Solvency II Guidelines (see our article below) and the progress on the Implementing Technical Standards, among other updates.

A link to the Newsletter is here.

A link to the Central Bank's note on the testing process is here.

A link to the information document on the phasing-in approvals is here.

Central Bank Publishes Enforcement Priorities For 2015

On 9 February, the Central Bank published its statement of enforcement priorities for 2015. The publication is intended to show the enforcement priorities in a transparent manner and highlight the need for firms to ensure that their policies and procedures are up to date and in compliance with the Central Bank's standards. The enforcement priorities help to focus the Central Bank's resources on areas of particular importance while it continues its broader enforcement activities.

The Central Bank states that it views compliance with prudential requirements as a central component of its enforcement policy across all sectors. In particular, the Central Bank will focus on the insurance industry, amongst others, in relation to prudential requirements in 2015. It also lists priorities in cross-sector enforcement: systems and controls; provision of timely, complete and accurate information; appropriate governance and oversight of outsourced activities; anti-money laundering/counter terrorism financing compliance; and fitness and probity obligations.

The Central Bank also stated that it uses a deterrent enforcement policy in relation to low impact firm as it has less engagement with these firms. However, when it becomes aware of a breach by a low impact firm, the Central Bank uses its enforcement powers, which highlights that any non-compliance by any firm will be regarded as serious.

A link to the statement is here.

Central Bank Publishes Intermediary Times

On 24 February, the Central Bank published the latest edition of the Intermediary Times which contains updates in respect of compliance topics and supervisory priorities for 2015. It notes that the Central Bank has recently written to all retail intermediaries to remind them to submit both an online Retail Intermediaries Annual Return and their annual PCF Confirmation Return. The deadline for the PCF Confirmation Return is 6 March.

The Intermediary Times also highlights two recent publications of the Central Bank: (1) the Consumer Protection Outlook Report (discussed below); and (2) the Handbook of Prudential Requirements for Investment Intermediaries (which requires all investment intermediaries to hold Professional Indemnity Insurance). In addition, it discusses best practice in relation to sales incentives and notes that sales remuneration is, and will continue to be, a priority for the Central Bank.

Finally, the newsletter sets out a number of the advertising requirements of the Consumer Protection Code which retail intermediaries should be aware of, together with an announcement in respect of the recently re-launched website of the Investor Compensation Company Limited.

A link to the Intermediary Times is here.

Central Bank Publishes Consumer Protection Outlook Report

On 6 February, the Central Bank published its first Consumer Protection Outlook Report (the Report). The purpose of the Report is to set out the consumer protection themes which the Central Bank will focus on in order to shape its consumer protection policies and ensure that firms act in the best interest of their consumers. The Report focuses on the Central Bank's "5 Cs Framework": i.e. (1) focusing on the consumer; (2) ensuring that firms have a consumer focused culture; (3) enabling customers to have confidence in the decisions made by firms; (4) encouraging firms to challenge themselves when they are not focused on consumer outcomes; and (5) the need for regulatory action when compliance standards are not met.

In the context of the 5 Cs Framework, the Central Bank has set out a number of key priorities. Some of these priorities include: continuing to help to shape the European, International and domestic legislative agendas; continuing to engage with Boards and CEOs to improve their understanding of customers concerns and assumptions about their products so that they can show an improved end result for the customer; scrutinise the adoption by firms of the Central Bank 2014 guidance on appropriate variable remuneration arrangements; and concentrate its supervisory focus on firms falling below the minimum standards which expose consumers to risk.

The Report notes that the Central Bank will continue to review its priorities and update them annually in order to reflect the dynamic consumer environment.

A link to the Report is here.

Financial Services Ombudsman Publishes Annual Review 2014

On 26 February, the Financial Services Ombudsman's Bureau (FSOB) published its Annual Review (the Review) for 2014. The Review summarises the substantiated/partially substantiated complaints made against regulated providers to the FSOB in 2014, categorised by provider product type. It provides graphs which compare the 2014 statistics against previous years. Helpfully, the Review includes a number of case studies to highlight the main issues the FSOB encountered, including issues relating to settled cases.

The Review indicates that in 2014 there was a decrease of 42% in the number of complaints made to the FSOB compared with 2013. The FSOB attributes the decrease in complaints to the changes in policy and powers of the FSOB introduced in September 2013. Complaints were reduced across all three sectors: by 65% for investment complaints; by 49% for insurance complaints; and by 27% for banking complaints. The reduction in complaints has had the corollary effect of a 25% decrease in the number of findings issued by the FSOB. The Review notes that payment protection policy (PPI) complaints continue to be the main source of insurance complaints (15% of all complaints received by the FSOB relate to PPI). Nevertheless, progress is being made in this area as 2014 saw a drop of 61% in PPI complaints in comparison to 2013.

Find a link to the Review here.

To read this Update in full, please click 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.