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INSURANCE
Group Briefing Insurance Regulatory Update
September 2017
KEY CONTACTS
If you require advice or further information, please contact Elizabeth Bothwell, Jennifer McCarthy,or your usual Arthur Coxcontact.
SEPTEMBER 2017 THIS MONTH'S NEWS
MINIMUM COMPETENCY CODE 2017
CENTRAL BANK PUBLISHES INSURANCE QUATERLY NEWSLETTER - SEPTEMBER 2017
ON CONSUMER CONFIDENCE IN THE EUROPEAN INSURANCE AND PENSIONS MARKET
INSURANCE EUROPE PROVIDES RESPONSE TO IAIS CONSULTATIONS ON ICP 1, 2, 18 AND 19
ELIZABETH BOTHWELL PARTNER
+353 1 920 1670 [email protected]
JENNIFER MCCARTHY PARTNER
+353 1 920 1167 [email protected]
This document 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.
LIFE ASSURANCE (PROVISION OF INFORMATION) REGULATIONS
IN DOMESTIC NEWS...
(AMENDMENT) REGULATIONS 2017 AND DEAR CEO LETTER IN RESPECT
MINIMUM COMPETENCY CODE 2017
OF THE KEY INFORMATION DOCUMENT
On 1 September, the Minimum
CENTRAL BANK DELIVERS PRESENTATION ON INTERNAL MODELS UNDER SOLVENCY II
Competency Regulations 2017 and the revised Minimum Competency Code 2017 (MCC), were published and will take effect on 3 January 2018. The
EU COMMISSION PUBLISHES IMPLEMENTING MEASURES FOR IDD WHILE EIOPA GATHERS DATA TO DEVELOP AN IDD Q&A
changes to the MCC are brought about due to the competency requirements contained in the Mortgage Credit Regulations, MIFID II, the Insurance
EUROPEAN COMMISSION ADOPTS LEGISLATIVE PROPOSALS FOR REFORMS TO EUROPEAN SYSTEM OF FINANCIAL SUPERVISION
Distribution Directive (IDD) and implement the ESMA guidelines for the assessment of knowledge and competence.
EU AND US SIGN BILATERAL AGREEMENT ON INSURANCE AND REINSURANCE
The MCC specifies certain minimum competency standards with which
EUROPEAN COMMISSION
persons falling within its scope must
PUBLISHES RESPONSES TO PUBLIC comply when performing certain
CONSULTATION ON FINTECH
controlled functions i.e. providing
INSURANCE EUROPE RESPONDS TO advice or information to consumers on
THE FIRST SET OF EIOPA ADVICE retail financial products, arranging or
ON SOLVENCY II REVIEW
offering to arrange retail financial
EIOPA PUBLISHES A NEW SET OF SOLVENCY II STATISTICS ON THE EUROPEAN INSURANCE SECTOR
products for consumers (including any amendments to insurance cover) or the exercise of a specified function. From an
EIOPA'S HEAD OF POLICY DEPARTMENT DELIVERS SPEECH
insurance perspective, the key changes to the MCC are as follows:
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INSURANCE REGULATORY UPDATE
PRODUCT DESIGN
(SFCR) and the regular supervisory
At least one key member of staff
review for each regulated entity will be
involved in product design of a retail presented to industry at an upcoming
financial product must meet a prescribed briefing on October 24. The Central
standard of competency for that product. Bank also wrote to all CEO's in
In terms of the competencies that that September requesting information on
person is expected to exhibit, EIOPA Brexit contingency planning and
have published guidelines on product responses are expected by 31 October
oversight and governance arrangements, 2017. The Central Bank is also
which include requirements in relation undertaking a general insurance stress
to the competence of manufacturers of testing exercise all submissions
products.
expected at the start of September have
generic pre-contractual document would conflict with the regulation on Packaged Retail and Insurance-based Investment Products (the "PRIIPs Regulation"), Regulation 7(2) of the Life Regulations will be dis-applied to any products that fall within the scope of the PRIIPs Regulation when the PRIIPs Regulations will enter into force on 1 January 2018.
The Central Bank published a "dear
DEFINITION OF ADVICE
The definition of "advice" has been amended to bring it in line with MIFID II and the IDD. Advice in this context means the provision of a personal recommendation to a person whether at the person's request or at the request or at the initiative of the firm, in the course of performing a relevant function.
been received. The Central Bank hopes CEO letter" on 4 September, stating that
to finalise the results by year end 2017. the Central Bank intends to carry out
consumer testing during the course of
The supervisory approach will remain 2018 to assess the effectiveness of the
forward looking and judgement based in key information document (KID)
to 2018. The Central Bank also notes the required under the PRIIPs Regulation
change in appointments Ed Sibley as and the current Life Regulation
Deputy Governor, Derville Roland as disclosure document. In the meantime,
Director General, Financial Conduct and the Central Bank's expectation is that
Marie Louise Delahunty as Head of
regulated entities will clearly explain to
NEW DEFINITION OF INFORMATION
Information means the provision of information to a person, whether at the person's request or at the initiative of the firm, that may assist the person in the choice of retail financial product. However, this does not include the following:
Division for Insurance Supervision. Articles are included regarding IT and cyber risk management, transparency and accountability and the discontinuation of the "Blue Book", which was the annual insurance statistics publication. The Central Bank also announces its intention to issue a cross sectoral survey on outsourcing
retail investors the personalised nature of the Life Regulations disclosure document and the generic nature of the KID, when providing both disclosure documents.
The Central Bank's "dear CEO letter" is here.
"staff pointing out where persons can find information";
activities to regulated firms on the 13 October. Firms are expected to respond to the survey by 17 November.
CENTRAL BANK DELIVERS PRESENTATION ON INTERNAL MODELS UNDER SOLVENCY II
"the provision of a brochure or booklet without giving additional information"; and
A useful summary of the changes brought about by the Solvency II amended Regulations 2017 is also
provided. "Information given in a newspaper,
journal, magazine or other publication", which were
A link to the newsletter is here.
previously encompassed under the LIFE ASSURANCE (PROVISION OF
definition of advice.
INFORMATION) REGULATIONS
(AMENDMENT) REGULATIONS 2017 AND
The Central Bank has also published a Q&A document on the MCC 2017,
DEAR CEO LETTER IN RESPECT OF THE KEY INFORMATION DOCUMENT
which is here.
On 4 September, the Life Assurance
(Provision of Information) Regulations The Central Bank's MCC 2017 is here. 2001 (the "Life Regulations") were
CENTRAL BANK PUBLISHES INSURANCE QUARTERLY NEWSLETTER SEPTEMBER 2017
amended by S.I. no. 392 of 2017. The Life Regulations allow for the provision of a generic disclosure document to a consumer before they sign a proposal
The newsletter provides an update of the form, where it is not otherwise
activities of the Insurance Directorate in practicable to provide a personalised
the preceding quarter. The initial
document at that time. A personalised
findings of the Central Bank review of disclosure document must then be
the first annual Solvency II returns, the provided at the time of issuing the
Solvency Financial Conditions Report policy. As the provision of another
The Head of Actuarial Function at the Central Bank recently delivered a presentation on the regulatory approach to Internal Models under Solvency II. The presentation dealt with issues such as the Internal Model approval process, inter-regulatory approval and on-going supervision. Helpfully, the Central Bank provides some feedback and observations on Internal Models they have reviewed to date.
The Central Bank's presentation slides are here.
IN EUROPEAN AND INTERNATIONAL NEWS...
EU COMMISSION PUBLISHES IMPLEMENTING MEASURES FOR IDD WHILE EIOPA GATHERS DATA TO DEVELOP AN IDD Q&A
The EU Commission has adopted implementing measures in the form of Delegated Regulations to facilitate the
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implementation of the IDD in February European Supervisory Authorities (that for EU (re)insurers active in the US and
2018. The two relevant regulations
is, the EBA Regulation, the EIOPA
vise versa. US/EU reinsurers will no
cover:
Regulation and the ESMA Regulation) longer have to post collateral in the
relating to their legislative powers,
other jurisdiction in respect of their
product oversight and governance governance and funding, among other obligations under reinsurance contacts,
requirements for insurance
issues. These amendments will require nor will they be required to have a local
undertakings and insurance
corresponding changes to be made to the presence. "Double" regulation of
distributors; and
sector specific legislation.
insurance groups in the EU and the US
is also addressed under the agreement,
information requirements and
Some important changes relevant to the for example, EU reinsurance groups can
conduct of business rules applicable insurance industry include:
use their group ORSA to satisfy US
to the distribution of insurance
supervisors. While it will take up to 60
based investment products.
amending the Solvency II Directive months for the entire agreement to
to give EIOPA a greater role to
apply, certain provisions such as group
They will come into force on the same
harmonise the approach of
supervision and the establishment of a
day as the IDD, 23 February 2018,
supervisors on the approval of
Joint Committee (which shall provide a
assuming no objection from European
internal model applications so as to forum for consultation and to exchange
Parliament and the Council.
reduce the inconsistencies of
information on the administration of the
different EU regulators in this area. Agreement and its proper
EIOPA launched a survey to gather data
EIOPA will also be given the power implementation), will be "provisionally
from the insurance industry stakeholders to issue Opinions in relation to the applied" swiftly following signing.
to develop a set of questions and
approach taken and to settle
answers (Q&As) on the interpretation
disputes;
The European Commission's fact sheet
and application of the Insurance
on the agreement is here.
Distribution Directive (IDD) and its
bringing the Motor Insurance
implementing measures. The Q&As will Directive (2009/103/EC) within the The European Commission's press
not have the force of law and will not be
scope of the EIOPA Regulation; release is here.
subject to a "comply or explain"
and
process. However, it is intended that
EUROPEAN COMMISSION PUBLISHES
they will provide more clarity to market participants on the application of the
giving EIOPA and ESMA the responsibility for developing and
RESPONSES TO PUBLIC CONSULTATION ON FINTECH
IDD. EIOPA and national competent authorities will also scrutinise their application, given their practical significance to achieve a level-playing field.
EIOPA will take comment on questions raised up until 11 October 2017.
EIOPA's survey is here.
The delegated regulations are here.
EUROPEAN COMMISSION ADOPTS LEGISLATIVE PROPOSALS FOR REFORMS TO EUROPEAN SYSTEM OF FINANCIAL SUPERVISION
maintaining a supervisory handbook.
The European Parliament and the Council will now consider the proposals.
The European Commission's proposals are here.
The specific amendments proposed to be made to the Solvency II Directive is here.
EU AND US SIGN BILATERAL AGREEMENT ON INSURANCE AND REINSURANCE
The European Commission has
published a legislative proposal to give The EU and the US have signed a
additional powers and responsibilities to landmark bilateral agreement on the
the European Supervisory Authorities conduct of (re)insurance on a cross-
(which includes EIOPA). The
border basis. The signing, on 22
Commission believes that reform of the September, marks the final step in more
EU supervisory framework is necessary than 20 years of discussions and a year
to increase financial integration within of formal negotiations between the
the EU.
European Commission and the US
Department of the Treasury and Office
Amendments are proposed to the three of the Trade Representative. The
regulations that established the
agreement should cut costs and red tape
On 13 September, the European Commission released details of the 226 responses it received in relation to its public consultation entitled "FinTech: a more competitive and innovative European financial sector". The purpose of the consultation was to seek input from stakeholders, including providers and consumers of financial services, to further develop the Commission's policy approach towards technological innovation in that sector. The vast majority of responses came from industry.
The key messages that emerged from the consultation was a recognition that FinTech is a major driver of financial sector development and that FinTech creates operational efficiencies, costsavings, as well as greater competition. On the risk side, the predominant themes raised were cybersecurity, the use and control of data and money laundering.
Details of the responses to the consultation are here.
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INSURANCE EUROPE RESPONDS TO THE consumer confidence in the financial
FIRST SET OF EIOPA ADVICE ON SOLVENCY II REVIEW
services industry.
said that the suggestion in the text to overlook the legal requirements of individual jurisdictions, and to apply a
In a position paper published on 4
Dr Zweimller stated that the primary different standard, undermines the
September, Insurance Europe
strategic objective of EIOPA is and will objectives of supervisor's in setting their
acknowledges that while progress had continue to be the protection of
jurisdictional requirements, potentially
been made, additional work in several consumers. The two principal
resulting in a loss of choice for
areas is required for the upcoming
mechanism of consumer protection
policyholders. Commenting on ICP 19,
Solvency II review. These include: the employed by the authority are: a robust which deals with market conduct,
treatment of undertaking specific
regulatory framework and developing a Insurance Europe highlighted the need
parameters, risk-mitigation techniques, comprehensive risk based and
to make the principle of proportionality
loss absorbing capacity of deferred taxes preventive framework for the conduct of more evident, especially in terms of the
and the consideration of guarantees and business. She emphasised the
requirement for senior management to
simplified calculations.
importance of achieving customer
evaluate the implementation and
centricity as the market becomes ever monitoring of procedures, as
Insurance Europe's position paper is here.
more digitalised and encouraged the excessively detailed procedures would financial services sector to embrace the be too onerous to implement, especially benefits of consumer protection in order for small firms.
EIOPA PUBLISHES A NEW SET OF SOLVENCY II STATISTICS ON THE
to win back consumer confidence lost in
recent years.
The Insurance Europe's response to ICP
EUROPEAN INSURANCE SECTOR
1 and 2 is here.
Dr Zweimller also pointed to EIOPA's
On 18 September, EIOPA published its recent work on the Insurance
The Insurance Europe's response to ICP
second set of statistical information on Distribution Directive and Product
18 and 19 is here.
the European insurance sector based on Oversight and Governance as examples
quantitative Solvency II regulatory
of the authority's continued focus on
reporting from individual (re)insurers consumers.
for the fourth quarter of 2016. The
statistics are accompanied by a note
Dr Zweimller's speech is here.
describing the key aspects of each result.
It contains country breakdowns and
INSURANCE EUROPE PROVIDES
distributions of key variables.
RESPONSE TO IAIS CONSULTATIONS ON ICP 1, 2, 18 AND 19
The publication also includes a set of indicators based on financial stability reporting for the largest European insurance groups and undertakings on an aggregated level.
Insurance Europe has responded to the International Association of Insurance Supervisors' (IAIS) consultations on revisions to Insurance Core Principles (ICP) 1,2,18 and 19.
EIOPA's statistical reports are here.
EIOPA'S HEAD OF POLICY DEPARTMENT DELIVERS SPEECH ON CONSUMER CONFIDENCE IN THE EUROPEAN INSURANCE AND PENSIONS MARKET
On 4 September, EIOPA's Head of Policy Department, Dr Manuela Zweimller delivered a speech entitled "Consumers First", which highlighted the importance of the EU regulatory and supervisory framework in maintaining
In response to ICP 1, which discusses objectives, powers and responsibilities of the supervisor, Insurance Europe called for the addition of good regulatory practices to guide supervisors. On ICP 2, Insurance Europe said it did not support the IAIS decision to delete the reference to confidentiality as it related to the role of supervisors. On ICP 18, which deals with intermediaries, Insurance Europe