A roundup of developments affecting the insurance industry from the past month including a new FCA webpage on the IDD, HMT publishing a report on insurance fraud and EIOPA publishing a report on the structure of insurance intermediary markets in Europe.


General Update

SM&CR extended to insurers

The Senior Managers and Certification Regime (SM&CR), previously applying only to the banking sector, has now been extended to all insurers regulated by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) with effect from 10 December 2018. This applies to all firms which are dual regulated insurance and reinsurance firms and will replace the Senior Insurance Managers Regime (SIMR) and the Revised Approved Persons Regime.

FCA, 10 December 2018

EIOPA has announced the results of the 2018 insurance stress test

The European Insurance and Occupational Pensions Authority (EIOPA) has announced the results of its 2018 and fourth stress test for the European insurance sector. The tests assessed the resilience of the insurance sector when put in three severe scenarios: a sudden and sizeable repricing of risk premia and increase in claims inflation; a protracted period of low interest rates accompanied by an increase in life expectancy; and a series of natural disasters. 42 European (re)insurance groups participated representing a market coverage of around 75% based on total consolidated assets. The tests confirmed the significant sensitivity to market shocks combined with specific shocks relevant for the European insurance sector. On aggregate, EIOPA found the sector is adequately capitalised to absorb the prescribed shocks.

EIOPA, 17 December 2018

IAIS publishes report on identifying global systemically important insurers

The International Association of Insurance Supervisors (IAIS) has published a report on its 2018 process for identifying global systemically important insurers (G-SIIs). The report confirms the methodology and data templates used by the IAIS in the identification process, and compares the results with data from previous years.

IAIS, 18 December 2018

Insurance Europe comments on the evaluation of the Distance Marketing of Financial Services Directive

The European Commission has published the feedback provided by Insurance Europe (IE) on the evaluation of the Distance Marketing of Financial Services Directive 2002/65/EC (DMD). The Commission launched this evaluation to discuss whether the DMD remains fit to respond to market developments and in line with other EU legislation.

European Commission, 19 December 2018

HMT publishes Insurance Fraud Taskforce Report 2017

HM Treasury (HMT) has published a report put forward by the Insurance Fraud Taskforce (IFT) on the progress made during 2017 to reduce the level of insurance fraud. The IFT was set up to investigate the causes of insurance fraud and recommend solutions, with the ultimate aim of lowering costs in order to safeguard consumer interests. 

HMT, 20 December 2018

EIOPA publishes its seventh Consumer Trends Report

The EIOPA has published its Seventh Consumer Trends Report outlining the major developments in the insurance and pensions sectors that are impacting European consumers. The report found that digital technologies in insurance and pensions are continuing to hold a progressive presence and cross-selling practices and the sale of add-on insurance continue to grow.

EIOPA, 20 December 2018

EIOPA outlines key financial stability risks for (re)insurers and pension funds

The EIOPA has published its December 2018 Financial Stability Report on the risks in relation to the (re)insurance and occupational pensions sectors in the EEA. The report discusses the 2018 insurance stress test (referred to above) and key risks which include the sudden reassessment of risk premia, prolonged low interest rates and climate and cyber related risks.

EIOPA, 20 December 2018

EIOPA Opinion on non-life cross-border insurance business of a long-term nature

​The EIOPA has published an 'Opinion on non-life cross-border insurance business of a long-term nature and its supervision'. The Opinion sets out EIOPA's expectations on the calculation of technical provisions and the governance for cross-border business and is addressed to National Competent Authorities (NCAs).

EIOPA, 21 December 2018

Brexit

Insurance Distribution (Amendment) (EU Exit) Regulations 2019

The draft Insurance Distribution (Amendment) (EU Exit) Regulations 2019 were laid before parliament on 19 December 2018 under the European Union (Withdrawal) Act 2018 in preparation for Brexit. The draft SI proposes to amend retained direct EU legislation relating to the Insurance Distribution Directive in order to address deficiencies in retained EU law, arising from the withdrawal of the UK from the EU. It comes into force on exit day. The draft SI is part of the wider work the government is undertaking to prepare for Brexit. Broadly, this is not intended to make policy changes, other than to reflect the UK’s new position outside the EU, and to help ensure a smooth transition.

HMT, 19 December 2018

US and UK sign bilateral agreement on prudential measures regarding insurance and reinsurance

The US and UK governments have announced that the bilateral agreement between the US and the UK on prudential measures regarding insurance and reinsurance (the US-UK covered agreement) was signed on 18 December 2018. The two governments said that the agreement should provide regulatory certainty and market continuity when the UK is no longer subject to the EU-US covered agreement. The chairman of the London Market Group stated that the agreement is 'a vindication of London’s position as the world leader in providing specialty insurance and reinsurance'.

HMT, 20 December 2018

Insurance Distribution Directive

FCA publishes new page on IDD: delivering clear, fair outcomes for consumers

The FCA has published a new webpage relating to the Insurance Distribution Directive (IDD), which sets out important areas it expects firms to have considered in relation to the new rules introduced under IDD. It also identifies areas where the FCA intends to focus its supervision, including requirements to identify customers' insurance demands and needs, product oversight and governance arrangements and the customer's best interest rule. 

FCA, 5 December 2018

IDD: EIOPA evaluates the European Insurance Intermediaries Markets

The EIOPA has published a report entitled 'Evaluation of the Structure of Insurance Intermediaries Markets in Europe' which has been produced in accordance with Article 41(5) of the Insurance Distribution Directive (IDD). The report provides an overview of the status of the European intermediaries markets relating to data for the period from 2013 to 2017. The report identified many key developments include a decrease in the number of registered intermediaries and the increase in number of intermediaries' notifications to carry out cross-border business.

EIOPA, 13 December 2018

Solvency II

EIOPA publishes new Q&As on regulation

The EIOPA has published new sets of Q&As on regulation. The new Q&As relate to templates for the submission of information to the supervisory authorities under the Solvency II Directive 2009/138/EC, and Commission Delegated Regulation (EU) 2015/35 (the Solvency II Delegated Act).

EIOPA, 3 December 2018

PRA publishes Policy Statement (PS31/18) and updates Supervisory Statement (SS3/17) on Solvency II

The Prudential Regulation Authority (PRA) has published Policy Statement 31/18 (PS31/18) on Solvency II – equity release mortgages and updated Supervisory Statement 3/17 (SS3/17) on Solvency II: Matching adjustment - illiquid unrated assets and equity release mortgages. 

PRA, 10 December 2018

FSI paper on proportionality in applying insurance solvency requirements

The Bank of International Settlements (BIS) has published a Financial Stability Institute (FSI) paper analysing proportionality in the application of insurance solvency requirements. The paper has been based on a survey of 16 insurance authorities, and provides details of how the authorities identify insurers are eligible for simplified solvency rules.

BIS, 11 December 2018

Insurance Europe responds to European Commission 2018 Solvency II consultation

Insurance Europe has published its response to the European Commission's consultation on draft proposals for the 2018 review of the Solvency II Delegated Regulation. Insurance Europe raised various concerns about the proposals, stating that whilst it supports the aim of simplifying Solvency II and increasing proportionality in its application, the proposals lack ambition in several important areas such as the recalibration of long-term equity and the review of the risk margin.

IE, 11 December 2018

EIOPA calls for input on Solvency II reporting and disclosure requirements

As part of the 2020 Solvency II review, the EIOPA launched a call for input on Solvency II reporting and disclosure requirements, with a view to assessing whether the requirements remain fit-for-purpose and allow for a risk-based and proportionate approach.

EIOPA, 19 December 2018

EIOPA reports on group supervision, capital management and passporting under Solvency II

The EIOPA has published a report addressed to the European Commission. The report is a response to the European Commission's requests for further information that will facilitate it making an assessment of the benefit of group supervision and capital management of (re)insurance undertakings and on specific topics related to freedom to provide services (FoS) and freedom of establishment (FoE) under Directive 2009/138/EC (Solvency II). 

EIOPA, 19 December 2018

EIOPA updates representative portfolios for VA calculations under Solvency II

The EIOPA has published updated representative portfolios to be used for calculating the volatility adjustments (VA) to the relevant risk-free interest rate term structures for Solvency II. EIOPA will start using these updated representative portfolios at the end of March 2019, which will be published at the start of April 2019.

EIOPA, 19 December 2018

EIOPA publishes third annual report on use of exemptions and limitations from Solvency II reporting

The EIOPA has published a report on the use of exemptions and limitations from the regular supervisory reporting during 2017 and Q1 2018 produced by national competent authorities (NCAs) under the Solvency II Directive. The report addresses how the proportionality principle on the reporting requirements have been applied by the NCAs across the EEA.

EIOPA, 20 December 2018

Key contacts

Brian McDonnell

Brian McDonnell

Partner, Financial Regulation
London

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Lorna Finlayson

Lorna Finlayson

Partner, Financial Regulation
Edinburgh

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Richard Wise

Richard Wise

Partner, Head of Insurance Disputes
London

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