Financial Services Regulation and Compliance – Insurance Feb 2022

Sara G. Norris

DOMESTIC

Central Bank issues its final guidance on the use of service companies in the insurance Sector

On 31 January 2022, the Central Bank of Ireland (CBI) published its finalised guidance on the use of service companies for staffing purposes in the insurance sector (the guidance). The guidance applies to all Irish (re)insurance undertakings that have entered or propose to enter staffing or hybrid arrangements with separate legal entities.

The guidance substantively reflects the draft guidance issued by the CBI in August 2021. However, the CBI has amended its guidance relating to resolvability. The CBI explained in the feedback statement accompanying the guidance (the statement) that this was to clarify that its recommendation that an undertaking ring-fence six months’ working capital within the service company was only an example, and not a hard requirement.

The statement also clarifies a number of queries raised by stakeholders during the consultation period. For example, it confirms that due diligence requirements under the guidance only apply to prospective arrangements, but that firms should review existing arrangements to ensure they are augmented and updated to align with the guidance.

The CBI expects the guidance to be implemented by 31 January 2023.

CCPC publishes report on private motor insurance investigation

On 8 February 2022, the Competition and Consumer Protection Commission (CCPC) published a report on its investigation into suspected anti-competitive practices in the private motor insurance in Ireland.

The CCPC’s investigation commenced in 2016 and has identified competition law concerns in the private motor insurance sector. The CCPC has secured legally binding commitments from six of seven parties who, in the CCPC’s view, may have engaged in anti-competitive conduct.

The commitments involve implementing a comprehensive competition law compliance programme, or enhancing any existing programme to include regular competition law training on pricing practices. Each compliance programme is subject to independent expert oversight and each party will be required to make annual submissions to the CCPC certifying compliance with the commitments.

EUROPEAN

EIOPA publishes monthly technical information

On 3 February 2022, the European Insurance and Occupational Pensions Authority (EIOPA) published the following information with reference to the end of January 2022:

  • updated representative portfolios to be used for calculation of the volatility adjustments to the relevant risk-free interest rate term structures for Solvency II
  • technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of January 2022

The same day, EIOPA published technical information on the relevant risk free interest rate term structures (RFR) with reference to the end of January 2022. EIOPA confirmed all remaining publication dates for this information in 2022 as follows: 3 March, 5 April, 4 May, 3 June, 5 July, 3 August, 5 September, 6 October, 7 November and 5 December.

On 28 February 2022, EIOPA published the data point models (DPM) methodology in the technical format of XBLR as the standard for reporting data submission between EIOPA and national competent authorities. For Solvency II the PWD insurance DPM and Taxonomy 2.7.0. were updated on 28 February 2022.

EIOPA publishes 2022 Supervisory Convergence Plan

On 9 February 2022, EIOPA published its 2022 Supervisory Convergence Plan (the plan). The plan identifies EIOPA’s priorities for 2022 to enhance supervisory convergence and create a common supervisory culture and consistent supervisory practices in the European Union.

EIOPA’s priorities focus on three key areas:

Common supervisory culture and tools: EIOPA is, among other priorities, focused on proportionality, supervisory assessments of conduct risks, ESG issues and group supervision.

Risks to the internal market and level playing field: EIOPA is committed to addressing inconsistencies in the way National Competent Authorities (NCAs) treat reinsurance undertakings with head offices in third countries. It is also focused on developing supervisory convergence tools in the area of calculating technical provisions and benchmark studies on internal models.

Supervision of emerging risks: EIOPA will prioritise the implementation of a new framework on digital operational resilience, the supervision of run-off undertakings as well as the development of a supervisory convergence tool on cyber underwriting.

Decision of the EIOPA on peer reviews

On 8 February 2022, EIOPA published its decision on the framework and methodology for peer reviews. The decision relates to the peer reviews to be conducted by EIOPA on the activities of competent authorities in respect of specific topics such as the adequacy of resources of competent authorities and the application of best practices developed by competent authorities. The decision sets out the scope, framework and methodology for peer reviews and the phases of any peer review that is to be conducted. This decision also updates the methodology for peer reviews in order to ensure an objective assessment and comparison between the competent authorities reviewed.

The decision entered into force on 8 February 2022 and replaces the previous methodology EIOPA introduced in 2018.

EIOPA publishes revised single programming document 2022 – 2024

EIOPA published its revised single programming document for 2022-2024 which includes the Annual Work Programme for 2022.

The single programming document sets out EIOPA’s main strategic activity areas which include the following:

  1. The integration of sustainable finance into all EIOPA’s areas of work.
  2. Supporting the market in to address the challenges and opportunities presented by digital transformation.
  3. Enhancing the effectiveness of supervision.
  4. Ensuring sound prudential and business policy. EIOPA is completing this through its Solvency II among other things.
  5. Identifying, monitoring and reporting on risks to financial stability and conduct of business and prompting mitigating actions. One of the ways EIOPA is carrying out this work is though the regulate publication of insurance and pension statistics.
  6. Ensuring good governance and accountability while encouraging a more diverse and inclusive workplace.

The single programming document can be found here.

Antitrust: Commission seeks feedback on commitments offered by Insurance Ireland concerning access to its data sharing platform

On 25 February 2022, the European Commission (the EC) invited interested parties to provide feedback on the commitments offered by Insurance Ireland, to address competition concerns regarding access to “Insurance Link”, Insurance Ireland’s data sharing platform.

In June 2021, the EC issued a statement of objections outlining its view that Insurance Ireland had breached EU antitrust laws by restricting access to its Insurance Link information exchange system to its members. Insurance Link is a non-life insurance claims data pool where users can request certain information about insurance claims.

Insurance Ireland has made several commitments to alleviate the EC’s concerns. For example, it proposes to grant access to Insurance Link for non-members. Insurance Ireland has also committed to establishing a cost and usage-based fee model and committed to ensuring that the criteria for membership would be fair, objective, transparent and non-discriminatory. All commitments apply for ten years and Insurance Ireland will appoint a monitoring trustee who will report to the EC.

The Commission consultation process is open for one month, after which the Commission may accept Insurance Ireland’s commitments and drop its antitrust investigation.

  1. Sanctions imposed in response to the crisis in the Ukraine

Over the course of February, the EU imposed a number of sanctions in response to the crisis in the Ukraine. Given that the crisis is developing and sanctions are continuing to evolve, the CBI is publishing details of new restrictive measures/sanctions that are adopted in this regard, as well as any associated EU/UN guidance, on their dedicated webpage.

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