EUROPEAN PARLIAMENT NON-OBJECTION TO DELAY OF APPLICATION OF IDD DELEGATED REGULATIONS

On 8 February, the European Parliament published the text of a resolution stating that it does not object to the European Commission’s proposed delay in the application of two Insurance Distribution Directive (IDD) delegated regulations. The first delegated regulation deal with products oversight and governance and the second deals with information requirements and conduct of business rules relating to insurance-based investment products. The proposal to postpone the application date of the delegated regulations from 23 February 2018 to 1 October 2018 brings the application dates in line with the proposal to delay the application date of the IDD itself. If the Council of the EU does not object to the Commission's proposed Delegated Regulation, it will enter into force twenty days after its publication in the Official Journal of the EU.

On 14 February 2018, the Council, acting on the basis of the proposal from the Commission, confirmed an agreement to delay the transposition deadline of the Insurance Distribution Directive (IDD) to 1 July 2018 and the date for application of the new rules on insurance distribution to 1 October 2018. The delay will enable the insurance industry be in a better position to comply with IDD and the implementing rules and provide member states with more time to transpose the directive’s provisions.

A link to the text of the Parliament’s resolution is here.

The press release of the Council may be found here.

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EUROPEAN COMMISSION ISSUES BREXIT NOTICE TO (RE)INSURERS

On 8 February 2018, the European Commission issued a notice to stakeholders on Brexit and the EU rules in the field of (re)insurance. The notice points out several issues that will arise for (re)insurers when the UK becomes a third country. Issues arising include: UK insurance undertakings will no longer be allowed to provide services in the EU on the basis of their current authorisations; branches of UK insurance undertakings will need an authorisation in the Member State of their activity to be able to continue to do business and this authorisation will be more restricted than their current authorisation; UK reinsurance undertakings will have to comply, for their EU business, with the individual conditions set by each Member State in which they operate; UK insurers may not be able to ensure service continuity with regard to contracts concluded before the withdrawal date; Solvency II requires that UK insurers disclose to their policyholders the upcoming loss of EU authorisation; and group supervision and reporting will be affected.

A link to the notice is here.

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EIOPA PUBLISHES PAPER ON SYSTEMIC RISK AND MACROPRUDENTIAL POLICY

On 6 February, EIOPA published the first in a series of papers on systemic risk and macroprudential policy in the insurance sector. There has been much focus on this topic in the banking sector because of the role that sector played in the financial crisis. This new series of papers aims to ensure that the examination of systemic risk and macroprudential policy in the insurance sector fully reflects the industry’s specific nature.

The first paper in the series aims at identifying and analysing the sources of systemic risk in insurance from a conceptual point of view. The paper is divided into four parts. The first part provides an overview of the status of the discussion on the systemic risk and macroprudential policies in insurance and by depicting the most relevant lessons learned from the financial crisis and the banking sector. The second part explains the social dimension of macroprudential policy and financial stability. The third part illustrates dynamics in which systemic risk in insurance can be created or amplified. The fourth part sets out the flexible macroprudential framework specifically developed by EIOPA for the insurance sector.

A link to the paper is here.

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EIOPA CONSULTATION ON DRAFT RTS WHICH ADAPT THE BASE EURO AMOUNTS FOR PROFESSIONAL INDEMNITY INSURANCE (PII) AND FINANCIAL CAPACITY OF INTERMEDIARIES UNDER THE IDD

Article 10 (4) of the Insurance Distribution Directive (IDD) provides that the base PII cover to be held by (re)insurance intermediaries is €1.25 million per claim and €1.85 million per year for all claims, (compared to €1million per claim and €1.5million in aggregate per year under the Insurance Mediation Directive, which will soon be repealed and replaced by the IDD). Article 10 (6) (b) of the IDD also requires intermediaries to have permanent financial capacity amounting to 4% of the sum of annual premiums received subject to a minimum of €18,750.

Following an evaluation of the changes in Eurostat’s European index, EIOPA is now seeking feedback on its draft RTS, which proposes to increase the base PII and financial capacity amounts as follows:

  • €1,250,000 per claim to €1,300,370;

  • €1,850,000 per year for all claims to €1,924,550; and

  • €18,750 to €19,510.

The consultation is open until 27 April 2018 and EIOPA is required to submit the draft RTS to the European Commission by 30 June 2018.

EIOPA’s press release, consultation paper and draft RTS is here.

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INSURANCE EUROPE PUBLISHES RESPONSE TO CALL FOR FEEDBACK WITHIN THE FRAMEWORK OF BETTER REGULATION AGENGA

Insurance Europe published its feedback on the proposals to overhaul the three European Supervisory Authorities (ESA), the associated amendments to Solvency II and the proposed changes to the European Systemic Risk Board (ESRB). Despite welcoming the Commission's recognition of the need for stability, sectoral expertise and the decision to maintain the European Insurance and Occupational Pensions Authority (EIOPA) as a stand-alone authority, Insurance Europe noted several areas such as governance and oversight, which needs improvement to ensure EIOPA's work is at an appropriate standard. They further recommended that "acting in the interest of the European public good", should be included in the ESA’s mandate to secure a proportionate and balanced supervisory approach.

The press release may be found here.

The response on the proposal for a regulation amending the ESAs regulations may be found here.

The response on the proposal for a directive amending the Solvency II Directive may be found here.

The response on the proposal for a regulation amending the ESRB regulation may be found here.

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INSURANCE EUROPE RESPONDS TO INTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS (IAIS) CONSULTATION ON REVISIONS TO INSURANCE CORE PRINCIPLES (ICP) 15 AND 16

Insurance Europe has responded to the IAIS's consultation on revisions to the core principles on Investment (ICP 15) and Enterprise Risk Management for Solvency Purposes (ICP 16). The principle of "freedom of investment" should be incorporated into the core principles and any concerns over investment risks should be handled by appropriate and balanced qualitative and quantitative measures, which should have the accurate identification and measurement of the actual risk to which the insurer is exposed as its central focus.

With regards to ICP 16, Insurance Europe recommends merging the overlapping principles in ICP 16, ICP 8 on risk management and internal controls and the relevant parts of ComFrame (a set of international supervisory requirements focusing on the effective group-wide supervision of internationally active insurance groups) to avoid duplications and inconsistencies. Insurance Europe also warned that the specific requirements set out in ICP 16 might compromise the principle-based approach of the framework.

The press release may be found here.

The response may be found here.