A roundup of developments affecting the insurance industry from the past month including the FCA and PRA launching a new Insurtech start-up unit, the CMA's investigations into the super-complaint about a 'loyalty penalty' in key markets and the FCA collecting a third set of general insurance value measures data.


General Update 

Insurance Europe's response to IAIS paper on composition of boards warns against overly intrusive measures

Insurance Europe (IE) has published its response to a consultation by the International Association of Insurance Supervisors (IAIS) on its application paper on the composition and role of boards. IE considers that some of the measures put forward by the IAIS are overly intrusive and urges supervisors not to allow these measures to interfere with board processes when applying requirements to insurers.

IE, 6 September 2018

Lloyd's updates market reform contract guidance in light of Brussels launch

The Lloyd's Market Association (LMA) has published a new version (1.9) of its Market Reform Contract (Open Market) Guidance following its annual review of the contract guidance. The LMA and Lloyds have also provided an addendum to the guidance following the establishment of a new Brussels-based insurance company by Lloyds.

LMA, 7 September 2018

IE position paper requests more clarity in latest OECD tax avoidance paper

Insurance Europe (IE) has published a position paper entitled 'Insurance Europe response to the OECD discussion draft on the transfer pricing aspects of financial transactions', which provides comments on the draft regarding among other things, the rationale for a captive and determining the arm's length price of captives.

IE, 13 September 2018

Financial Guidance and Claims Act 2018 (Commencement No 2) Regulations 2018

On 1 October 2018, section 14 of the Financial Guidance and Claims Act SI 2018/1003 was brought into force in the UK which relates to a levy under FMSA 2000 for debt advice expenses of devolved authorities. Section 20 will come into force on 1 January 2019 which relates to information about the availability of guidance. 

UK Government, 14 September 2018

Second PRA consultation on SM&CR extension to insurers

The Prudential Regulation Authority (PRA) has launched consultation paper (CP) 20/18, to assist Solvency II insurers, which includes some proposed technical consequential changes to the PRA Rulebook for the Senior Managers and Certification Regime (SM&CR) to insurers. Feedback is sought by 17 October 2018.

PRA, 17 September 2018

PRA letter to chief actuaries sets out areas of regulatory focus

The Prudential Regulation Authority (PRA) has published a letter to James Orr, Chief Actuary of General Insurance at the Prudential Regulation Authority. The letter sets out areas of focus for the PRA’s ongoing supervisory approach. The PRA elaborates on the Actuarial Function by giving insight from discussions between the PRA and the actuarial sector and the PRA led reviews of the adequacy of firms' reserving with a sample of London market insurers.

PRA, 17 September 2018

FCA now collecting third set of general insurance value measures data

The Financial Conduct Authority (FCA) has updated its webpage on general insurance (GI) value measures. Following the March 2018 publication of the second set of data in its GI value measures pilot, the FCA says it is now collecting a third set of value measures data across claims frequency; claims acceptance rates; and average claims payout. The FCA says it intends to publish the data in early 2019 alongside a consultation on the reporting of GI value measures.

FCA, 19 September 2018

FCA announces outcome of investigation into four life insurance companies

The Financial Conduct Authority (FCA) has announced that its review into the fair treatment of longstanding customers in the life insurance sector has now closed. Although some issues have been raised which will be addressed through supervisory measures, the conduct of the four remaining firms of the investigations did not call for enforcement action. 

FCA, 19 September 2018

Link between work patterns and women’s access to senior positions

The Association of British Insurers (ABI) has published a report highlighting the issues women face with progression in the insurance space and ways in which these challenges can be overcome. The report analyses evidence from inside and outside the insurance industry, and says that making it easier for part-time and formerly part-time employees to advance is a key factor in reducing the seniority gap.

ABI, 21 September 2018

EIOPA Insurance and Reinsurance Stakeholder Group elects chair and vice chair

The European Insurance and Occupational Pensions Authority (EIOPA) has announced that Greg van Elsen has been elected chair of its Insurance and Reinsurance Stakeholder Group. The group also elected Michaela Koller, the director general of Insurance Europe, as its vice chair, representing the insurance industry.

EIOPA, 21 September 2018

CMA to investigate super-complaint on 'loyalty penalties' on consumer and competition law grounds

A super-complaint from Citizens Advice has prompted the Competition and Markets Authority (CMA) to investigate concerns that customers paying for key consumer services who stay with their provider on default or roll over contracts, are paying more than new customers. This issue has been termed the ‘loyalty penalty’. The super-complaint states that Citizens Advice has concerns about five ‘essential markets’, which are the savings accounts, mortgages, household insurance, mobile and broadband markets. The CMA will publish a response within 90 days.

CMA, 28 September 2018

Insurtech 

InsurTech: IE calls for activity-based regulation and supervision

Insurance Europe (IE) has responded to the European Insurance and Occupational Pensions Authority (EIOPA) stakeholder survey on InsurTech. IE said that regulatory and supervisory regimes should be activity-based (‘same activities, same rules’) meaning that EU consumer protection rules such as Solvency II and the Insurance Distribution Directive should apply to all insurers including new insurtech start-ups without the need for specific regulation for these new market entrants. This ensures that customers have the same level of protection, regardless of how established the insurer is in the market. IE wishes to encourage innovation through facilitating an open dialogue in the industry regarding regulation.

IE, 3 September 2018

FCA and PRA launch new insurer start-up unit

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have launched a new insurer start-up unit (NISU). The NISU guidance sets out four sections of information aimed at those thinking of setting up a new insurer in the UK provided from both the entities who are responsible for authorising any prospective insurer. The NISU is part of the regulators’ ongoing work to improve the authorisation process and the quality of applications for new insurers in the UK.

PRA, 4 September 2018

ESAs find limited growth in automated financial advice

The European Supervisory Authorities (ESAs)—the European Banking Authority, the European Insurance and Occupational Pensions Authority, and the European Securities and Markets Authority—have published the results of their monitoring exercise on automation in financial advice. The report shows that while there are some new trends emerging in the market such as the use of Big Data and chatbots, there is not a substantial change from the previous 2016 ESA Report. Although automation in financial advice is slowly growing, the identified risks have not materialised and therefore no immediate ESA action is necessary.

EIOPA, 5 September 2018

New report highlights strengths of Lloyd's managing agents in InsurTech 'arms race'

The Lloyd's Market Association (LMA) has published a new report by Oxbow Partners on InsurTech's effect on the Lloyd's market. The report explains the positive impact of new data sources on underwriting as well as how InsurTech has affected the SME insurance value chain. 

LMA, 21 September 2018

Brexit 

ESAs’ risk report highlights areas of volatility

The European Supervisory Authorities (ESAs)—the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA)—have published a report on risks and vulnerabilities in the EU financial system. It highlights risks surrounding abrupt asset price volatility, increasing interest rates and Brexit.

EIOPA, 11 September 2018

The Department for Exiting the European Union elaborates on the effect of a no deal exit on vehicle insurance.

The Department for Exiting the European Union has published a further account of what the implications would be of leaving the European Union in a 'no deal' scenario. In particular, the Department of Transport provides some guidance on providing motor insurance cover for driving in the EU.

The Department for Exiting the European Union, 24 September 2018

Insurance Distributive Directive 

CMA consults on its provisional review of the PPI Market Investigation Order 2011

The Competition and Markets Authority (CMA) has reached a provisional decision in its review of the Payment Protection Insurance Market Investigation Order 2011 (PPI Order), which has been brought out following the introduction of the Insurance Distribution Directive (IDD). It has issued a notice to make minor variations to the PPI Order, setting out three possible options of variation for example requiring PPI providers to produce an Insurance Product Information Document (IPID) for customers. The CMA is now conducting a further consultation on its provisional decision. Responses should be sent to the CMA by 29 October 2018.

CMA, 27 September 2018

EIOPA survey seeks views on sustainability risks and sustainability factors under the IDD and Solvency II

The European Insurance and Occupational Pensions Authority (EIOPA) is carrying out an online survey on the integration of sustainability risks and sustainability factors under the Insurance Distribution Directive (IDD) and the Solvency II Directive. The survey follows the European Commission’s request for technical advice from EIOPA supplementing the Commission's package of measures on sustainable finance, adopted by the Commission on 24 May 2018. Feedback is sought by 4 October 2018.

EIOPA, 14 September 2018

EIOPA launches new webpage on intermediaries registered under IDD

The European Insurance and Occupational Pensions Authority (EIOPA) has added a new webpage to its website which allows consumers to check whether an insurance intermediary is registered under the Insurance Distribution Directive (IDD) and therefore permitted to sell insurance products to the consumer by providing hyperlinks to national registers. The IDD came into effect on 1 October 2018.

EIOPA, 28 September 2018

Solvency II 

EIOPA publishes monthly technical information updates for the end of August 2018

The European Insurance and Occupational Pensions Authority (EIOPA) has published its August update of technical information on both the relevant risk-free interest rate (RFR) term structures and the symmetric adjustment of the equity capital charge for Solvency II.

EIOPA, 6 September 2018

Commission Delegated Regulation (EU) 2018/1221 published in the OJ

Commission Delegated Regulation (EU) 2018/1221 (the Solvency II Delegated Act Amendment Regulation) has been published in Official Journal of the EU. This regulation amends the Commission Delegated Regulation (EU) 2015/35 (the Solvency II Delegated Act) so that it correlates with Regulation (EU) 2017/2402 (the Securitisation Regulation) and Regulation (EU) 2017/2401 (the CRR Amendment Regulation).

European Union, 10 September 2018

EIOPA publishes new Q&As

The European Insurance and Occupational Pensions Authority (EIOPA) has published new Q&As on regulatory matters. Subjects covered include:

  • valuation of shares in an unlisted insurance company on the balance sheet of an entity regulated under Solvency II;
  • submission of information to supervisory authorities;
  • structure for disclosure of information by supervisory authorities; and
  • guidelines on valuation of technical provisions.

EIOPA, 18 September 2018

Bank of England seeks further feedback on insurance XBRL taxonomy

The Bank of England (BoE) has published a public working draft (PWD) of the standalone internal model output (IMO) and market risk sensitivities (MRS) taxonomy, alongside related technical artefacts, that will be part of the BoE's insurance XBRL taxonomy used for regulatory submissions. This PWD is based on proposals in the Solvency II: Updates to internal model output reporting consulting paper. Firms and software vendors are invited to give feedback on the data point modelling, annotated templates, validations, and XBRL taxonomy by 28 September 2018.

BoE, 21 September 2018

BoE director on insurance supervision and the consistency of disclosures

The Bank of England (BoE)’s executive director of insurance, David Rule, made a speech on today's issues in insurance supervision. He expressed the importance of discipline in underwriting, reserving and capital management, despite the difficult trading landscape in the global insurance market. Mr Rule said principally insurers should be more consistent with disclosing about market risk sensitivities and Solvency II.

BoE, 27 September 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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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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