This month's roundup of developments affecting the insurance industry...

Including the FCA warning that firms are still failing to meet the general insurance renewal rules, the publication of the FCA's business plan for 2018/19 and EIOPA publishing its 2018 supervisory convergence work plan for 2018/19 for the insurance sector.

General Update

FCA warning to firms that fail to meet insurance renewal rules

The FCA has published a press release to warn general insurance companies that if they do not implement the renewal pricing rules, which came into force on 1 April 2017, they will take action. The rules were implemented with the aim of increasing price transparency and encouraging shopping around at renewal time. The FCA said that it has found firms are still failing to properly implement the rules despite warning in October about failings.

FCA, 3 April 2018

FCA publishes business plan for 2018/19

The FCA has published its annual Business Plan which gives details of the specific areas of work the FCA is prioritising for the next year. In relation to the insurance sector, the FCA states that its priorities are fairness, access and value for retail customers, and an effectively functioning wholesale market. The FCA also comments that it considers the key drivers of harm to include suitability of products, renewal pricing, mis-selling, low value products, operational resilience and cyber-crime.

As part of "treatment of existing customers", one of the FCA's cross-sector priorities, the FCA lists the following as priorities in relation to insurance:

  • Understanding firms’ pricing practices in retail general insurance
  • Communicating with claims management companies in advance of regulation in 2019
  • Assessing claims inflation in general insurance
  • Helping consumers make informed decisions on their insurance needs


The Business Plan also gives an update on some of the FCA's key activities over the past year, including in the following areas:

  • The market study on wholesale insurance brokers - the FCA says it is aiming to publish its interim findings by the end of 2018
  • Diagnostic work on value in the distribution chain, which has looked at three insurance products: tradesman insurance; travel insurance; and motor ancillary insurances, including Guaranteed Asset Protection (GAP) insurance
  • Protecting vulnerable consumers – the FCA says it will publish its Feedback Statement from its Call for Input on Access to Travel Insurance in summer
  • GAP insurance – the FCA states it is keeping the rules under review

CA, 9 April 2018

PRA publishes Business Plan for 2018/19

The PRA has set out its 2018/19 Business Plan which addresses how it will face the challenges of EU withdrawal and operational resilience over the coming year. Key areas covered for insurance include: the continuing roll-out of the Senior Managers Regime and Senior Insurance Managers Regime, which is intended to strengthen accountability within firms; improvements to the implementation of Solvency II to tackle the problems with risk margin; and, a focus on robust balance sheets and effective risk management.

PRA, 9 April 2018

EIOPA supervisory convergence plan for 2018/19 and updates on strategy for conduct of business supervision

EIOPA has published its 2018 supervisory convergence work plan for 2018/19 for the insurance sector, which focuses on the implementation of the Solvency II Directive and conduct of business supervision. In addition, EIOPA has also published, "EIOPA's strategy for conduct of business supervision – next steps", which provides an update on the conclusions reached by EIOPA in this area and resulting adjustments to its conduct of business supervision strategy.

EIOPA, 24 April 2018

EIOPA oversight report sets out 2017 activities           

The EIOPA has published its 2017 Oversight activities report, setting out the tools it used to support national supervisory authorities in their tasks to deliver high-quality effective supervision, as well as overseeing the level playing field and appropriate application of supervisory measures within the EU.

EIOPA, 18 April 2018

EIOPA releases 13 sets of Q&As

The EIOPA has published a number of sets of Q&As. These include the guidelines on application of outwards reinsurance, the guidelines on group solvency, and the guidelines on own risk and solvency assessment.

EIOPA, 18 April 2018

PRA letter on capital extractions by insurance firms in run-off

The PRA has published a letter addressed to CEOs on capital extractions by insurance firms in run-off. The PRA notes that during the last two years, the accompanying information for some capital extraction requests from insurance firms in run-off has been inadequate, particularly in relation to stress tests and reserving. They encourage firms to engage with them before making a capital extraction request to avoid any unnecessary delays.

PRA, 12 April 2018

IAIS consults on issues paper on climate change risks to insurers

The International Association of Insurance Supervisors (IAIS) published a draft issues paper, prepared jointly with the Sustainable Insurance Forum (SIF), for consultation, on climate change risks to the insurance sector. The paper provides examples of current material risks and impacts, and describes how they may be relevant for the supervision and regulation of the sector.

International Association of Insurance Supervisors, 10 April 2018

EU-US bilateral agreement on insurance and reinsurance prudential measures

Following a decision of the Council of the EU,  the Official Journal of the EU (OJ) has published a notice confirming the entry into force of the bilateral agreement between the EU and the US on insurance and reinsurance measures. The agreement will enter into full force seven days after the EU and the US exchange the relevant notifications.

The Official Journal of the EU, 9 April 2018

Insurance Distribution Directive

Delegated Regulation delaying application date of IDD Delegated Regulations published in OJ

The Commission Delegated Regulation to delay the application of two delegated regulations supplementing the Insurance Distribution Directive (IDD) has been published in the Official Journal of the EU (OJ). The two delegated regulations relate to the product oversight and governance (POG) requirements, and information requirements and conduct of business rules applicable to the distribution of insurance-based investment products (IBIPs). The amending regulation entered into force on 26 April 2018.

OJ, 6 April 2018

Solvency II

PRA consultations on Solvency II reporting

The PRA has published a consultation paper (CP10/18) proposing updates to internal model output reporting under Solvency II. The PRA has proposed to amend the life, counterparty and non-life templates and the associated instructions (LOG files) in SS25/15 and SS26/15 with the changes set out in the Appendices. The changes are expected to take effect from 31 December 2018 for financial year-end 2018 reporting onwards.

The PRA has also published a further consultation paper on proposed changed to the file type and reporting format for a number of regular insurance reporting submissions in order to align with Solvency II Quantitative Reporting Templates and international data standards.

PRA, 20 April 2018

EIOPA 2017 oversight activities report

EIOPA has published a report on its oversight activities in 2017, under Article 259 of the Solvency II Directive (2009/138/EC), which requires EIOPA to deliver the annual report to the European Parliament in accordance with Article 50 of the EIOPA Regulation. There is a requirement for the report to focus on all relevant and significant experiences of the supervisory activities and co-operation between supervisors in the framework of the supervision of insurance and reinsurance undertakings in a group.

EIOPA, 19 April 2018

Draft Delegated Regulation amending Solvency II Delegated Regulation regarding the calculation of regulatory capital requirements for securitisations

The European Commission has published a draft Delegated Regulation amending the Solvency II Delegated Regulation as regards the calculation of regulatory capital requirements for securitisations and simple, transparent and standardised (STS) securitisations held by insurance and reinsurance undertakings.

European Commission, 17 April 2018

The PRA third consultation on external audit of public disclosure requirement under Solvency II

A consultation paper has been published by the PRA which discusses the external audit of the public disclosure requirement under the Solvency II Directive (2009/138/EC) (CP8/18). The consultation on the proposals for CP8/18 ends on 11 July 2018.

PRA, 11 April 2018

PRA consults on modelling of volatility adjustment under Solvency II

A consultation paper has been published by the PRA which considers applications from internal model firms that include a dynamic volatility adjustment (DVA) under the Solvency II Directive (2009/138/EC) (CP9/18). The consultation on the proposals for CP8/19 ends on 11 July 2018.

PRA, 11 April 2018

European Commission report on group supervision under Solvency II and transitional period for IORPs

European Commission has published a report on the application of Title III of the Solvency II Directive. Article 242(2) of the Solvency II Directive requires the Commission to report to the European Parliament and the Council of the EU, by the end of 2018, on the benefits of enhancing the group supervision provisions in Title III. The report fulfils this requirement.

EC, 5 April 2018

Key contacts

Brian McDonnell

Brian McDonnell

Partner, Financial Regulation
London

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Richard Wise

Richard Wise

Partner, Head of Insurance Disputes
London

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Lorna Finlayson

Lorna Finlayson

Partner, Financial Regulation
Edinburgh

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Robert Garwood

Robert Garwood

Managing Associate, London
United Kingdom

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Bethany Rugen

Bethany Rugen

Associate, Financial Regulation
Leeds

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