Insurance Regulatory Update, September 2014


Arthur Cox September 2014 Insurance Regulatory Update

  • Central Bank Publishes Regulations Amending the Fitness and Probity Regime
  • Insurance Statistics 2013 Are Published
  • Central Bank Publishes Recent “Dear CEO” Letter on Regulatory Reporting in Preparation for Solvency II
  • Central Bank Publishes Intermediary Times
  • Insurance Ireland Publishes Fact File 2013 
  • Insurance Europe Recommendations On The Proposed Data Protection Regulation
  • EIOPA Chairman Speaks On The Global Nature Of Insurance Supervision
  • Joint Forum Report on Supervisory Colleges for Financial Conglomerates
  • European Commission Publishes Q&A on New Statutory Audit Framework
  • EIOPA Publishes Risk Dashboard
  • Insurance Europe Publishes Key Facts Booklet


Central Bank publishes Regulations amending the Fitness and Probity Regime

On 4 September, the Central Bank published the Central Bank Reform Act 2010 (Sections 20 and 22) (Amendment) Regulations 2014 (the Regulations) and accompanying Central Bank guidance (the Guidance). The Regulations amend current fitness and probity legislation. Significantly, the Regulations provide for an additional six pre-approval controlled functions (PCFs). The six new PCF roles are: (i) Chief Operating Officer (for all regulated financial service providers); (ii) Head of Claims (for insurance undertakings); (iii) Signing Actuary (for non-life insurance undertakings and reinsurance undertakings); (iv) Head of Client Asset Oversight (for investment firms); (v) Head of Investor Money Oversight (for fund service providers); and (vi) Head of Credit (for retail credit firms).

The Regulations also clarify the scope of the exclusion from the Regulations for certified persons under the Investment Intermediaries Act. The title of some PCFs have also been changed; for example; the ‘Head of Risk’ will be referred to as the ‘Chief Risk Officer’ for all regulated firms, the ‘Head of Market Supervision’ will be referred to as ‘Head of Regulation’ (in respect of a market operator of a regulated market).
Any proposed appointment to one of the new PCF roles after 31 December 2014 will require the prior written authorisation of the Central Bank. Those currently in the position of any of the proposed PCF roles may continue in their role without the prior approval of the Central Bank. However, the regulated financial service provider will be required to compose a list of persons in situ in respect of the new PCF roles as of 31 December 2014. The list should be submitted to the Central Bank by 30 June 2015, together with confirmation that the due diligence required under the existing fitness and probity standards has been carried out on in respect of such individuals. The Guidance helpfully contains an FAQ which addresses common queries on the new Regulations.

A link to the Regulations is here.

A link to the Central Bank Guidance is here.

Insurance Statistics 2013 are published

On 17 September 2014, the Central Bank of Ireland published insurance industry statistics for 2013. The publication provides a summary of the life and non-life insurance returns made to the Central Bank of Ireland in respect of business written during the year ending 31 December 2013. 

The document contains tables of statistical data for life assurance, non-life insurance and Lloyds syndicates established in Ireland. The life assurance tables provide figures for the gross new life assurance business written in Ireland for 2013, net figures for life and industrial assurance business and a summary of the reinsurance of Irish life and industrial assurance. Total Irish life head office business for the year 2013 comprised of premium income of €23,975,906. Comparative tables for the years 2005 – 2013 are also provided. 

Non-life tables are provided for Irish and foreign risks broken down by class. The balance sheet totals for non-life insurance business for the year 2013 puts total assets at €32,204,356.

A link to the publication is here.

Central Bank publishes recent “Dear CEO” Letter on Regulatory Reporting in preparation for Solvency II

The Central Bank has recently published a letter which was sent to the CEO of each regulated insurer / reinsurer in July 2014. The letter outlines the requirement for each insurer/reinsurer designated as high/medium-high impact under PRISM (or groups above a specific threshold) to submit two sets of preparatory reports pursuant to the Central Bank Guidelines in preparation for Solvency II during the calendar year 2015. Those forms of preparatory reporting include (i) an annual submission containing both quantitative reporting templates and a narrative report for the year end 31 December 2014 (to be submitted within 22 weeks of year end) and (ii) a quarterly submission for the quarter ending on 30 September 2015 (submitted no later than eight weeks after that quarter end). The letter explains that the quantitative reporting templates must be submitted in eXtensible Business Reporting Language (XBRL format). Reports cannot be submitted by any alternative submission mechanism. EIOPA is also developing a tool for undertakings (T4U) to assist firms in preparing the quantitative reporting in XBRL format and this should be available in Q4 2014.

Central Bank publishes Intermediary Times

On 26 September 2014, the Central Bank published the latest edition of the Intermediary Times. 

As reported in the July edition of our Insurance Update, the Handbook of Prudential Requirements for Authorised Advisors and Restricted Intermediaries will be replaced by the Handbook of Prudential Requirements for Investment Intermediaries (the Handbook), with effect from 1 October 2014. The Intermediary Times focuses on the main changes in the Handbook.

Under the new Handbook, an intermediary is required to provide cover of €1.25 million per claim and €1.85 million in aggregate per type of regulated activity from 1 October 2014. Firms are reminded that the Central Bank is currently undertaking a thematic review of PII cover amongst intermediaries. 

Firms are also reminded that the Investor Compensation Company Limited (ICCL) levy is now overdue. Invoices have been issued to all member firms in August. The Central Bank also reports its plans to remove any intermediaries who are “uncontactable” from the public register, whether due to inactivity, liquidation, receivership or otherwise. Auditors of firms authorised under the Investment Intermediaries Act 1995 are reminded of their duties to submit relevant reports and a Statutory Duty of Confirmation to the Central Bank.

A link to the Intermediary Times is here.

Insurance Ireland Publishes Fact File 2013 

On 16 September, Insurance Ireland published its annual Fact File for 2013. The Fact File provides key facts and figures on the insurance industry in Ireland using statistics for 2013 and the period from 2009 to 2013 for comparison. It provides information on the Irish insurance market generally and the life and pensions market, the non-life insurance market and the international market.

In line with the 2012 Fact File, the data was primarily collected from members of Insurance Ireland. The Fact File indicates that gross insurance premium income for domestic life and non-life insurance was €11,313m in 2013, compared to €10,584 million in 2012, an increase of 6.9%. Premium income as a percentage of GDP was 7%, (previously 6.5% in 2012). The Fact File published a table analysing premiums per capita across a range of countries in US$. The figure for Ireland at US$3,783 is higher than some other European countries such as Germany and Belgium but lower than the UK and the Netherlands. 

The capital values of assets in many investment areas increased in 2013: assets comprising domestic life policyholders’ funds and non-life technical reserves increased to €89bn at the end of the year. This represents an increase of 4.6%.

A link to the Fact File is here.


Insurance Europe recommendations on the proposed Data Protection Regulation 

On 12 September 2014, Insurance Europe published its recommendations on the proposed Data Protection Regulation (the Regulation). The Regulation will supplement the existing data protection framework, as applies across Europe.

Insurance Europe made a number of recommendations. It recommends that the right of a data subject (insured) to withdraw consent to processing be dealt with in the Regulation appropriately as that right may hinder the execution of insurance contracts and lead to their possible termination. It also supports the inclusion of a legal right which would explicitly allow data controllers (insurers) to process data, when required, for the purpose of detecting and preventing fraud. Data controllers (insurers) should be permitted to process sensitive information where it is necessary to execute contracts (or where same is required at the pre-contract stage). Insurance Europe has also recommended a narrower definition of “health data” and has endorsed the Council’s decision that individuals can be profiled in specific circumstances. It also welcomed the Council’s decision not to oblige data controllers (insurers) to disclose commercially sensitive information and that the Regulation clearly state “the right to be forgotten” is a right a data subject can exercise on request (and that the right be limited to where there is a contractual relationship between the insurer and the insured or the retention of information is required to prevent fraud or to comply with regulatory requirements).

EIOPA Chairman speaks on the Global Nature of Insurance Supervision

On 9 September 2014, the Chairman of EIOPA, Mr. Gabriel Bernardino, delivered a speech on ‘Insurance Regulation and Supervision – Going Global’ at the 3rd Conference on Global Insurance Supervision in Frankfurt, Germany.

Mr. Bernardino addressed the globalisation of insurance business as insurance groups spread into new and emerging markets. This brings with it an increased need for co-operation between regulators and a need for a harmonious regulatory and supervisory approach worldwide. In particular, he emphasised this development increases the need for risk-based supervision.

He attributes the worldwide move towards risk-based supervision as a result of the development of the Solvency II equivalence process.

Mr Bernardino complimented the work of the International Association of Insurance Supervisors in making progress towards convergent supervision, particularly in regard to the development of International Capital Standards. He opined that the coordination of global capital standards will increase financial stability, enhance supervisory coordination, provide a common framework within which competent authorities can act, and ultimately benefit both consumers and industry.

Joint Forum Report on Supervisory Colleges for Financial Conglomerates 

On 3 September, the Joint Forum issued a report on supervisory colleges for financial conglomerates (FCs). The Joint Forum was established by the International Association of Insurance Supervisors and similar bodies for banking and securities supervision to deal with issues common to the three sectors, including the regulation of FCs. The report sets out the results of a self-assessment survey across 14 jurisdictions which sought to determine how effectively supervisory colleges for FCs address both cross-sectorial issues and specific questions which relate to areas such as corporate governance, capital adequacy and risk management. The survey also investigated the implementation of the Joint Forum Principles for Financial Supervision (the Principles) focusing, in particular, on the implementation of Principle 6; which covers supervisory cooperation, coordination and information sharing. 

The Joint Forum specifically highlighted that practices and approaches vary across jurisdictions as there are differences in the number and size of FCs and crisis management issues are only partially covered in different jurisdictions. Furthermore, the survey indicated that certain jurisdictions do not have arrangements in place such as a specific FC supervisory framework, coordination agreements with other supervisors or coordinating arrangements for on-site/off-site supervision with such supervisors. 

Overall, the Joint Forum indicated that progress has been made since its previous survey which took place in 2012 and noted that it intends to allow jurisdictions additional time to make progress with their implementation of the Principles. It plans to undertake another review next year. 

A link to the report is here.

European Commission publishes Q&A on New Statutory Audit Framework

On 3 September 2014, the European Commission published a Q&A on the implementation of the new regulatory framework on statutory audit. The new legal framework is based on two legislative instruments: a Directive amending the existing Statutory Audit Directive and a new Regulation on specific requirements regarding statutory audit of public-interest entities, applicable from 17 June 2016. The Q&A provides preliminary guidance to industry and other stakeholders on the implementation of the new Framework (it is not legally binding).

The Q&A confirms that the Commission will compile and make public information on the way individual member states have implemented the Framework. The Commission will also submit a report to the Parliament on the application of the Regulation five years after the transitional period. The Q&A also covers the following topics: (i) the entry into force and application of the new regulatory framework; (ii) the calculation of fees for non-audit services; (iii) the prohibition of non-audit services; (iv) the rotation of audit firms; (v) the basis and form of the new audit report; (vi) the adoption of the new International Standards on Auditing (ISAs); and (vii) the composition, member requirements and functions of audit committees.

A link to the European Commission’s Q&A is here.

EIOPA publishes Risk Dashboard

EIOPA has published its risk dashboard for the second quarter of 2014. The risk dashboard gives an overview of risks faced by the insurance industry on a Pan-European basis. While EIOPA notes that the risk environment remains largely unchanged since the last EIOPA risk dashboard, it highlights some changes in both credit risk, liquidity and funding. Credit risk conditions show improvement. Liquidity and funding risks have also changed as Cat Bond Issuance reaches an all time high.

Insurance Europe Publishes Key Facts Booklet 

On 1 September, Insurance Europe published its annual Key Facts Booklet. The Booklet provides interesting information on the European insurance industry’s place in the global market. The Booklet notes that insurer investments in the European economy continued to grow in 2013. Total European gross written premiums increased by 2.7% in 2013. Life assurance premiums grew by 4.7% and health insurance premiums increased by 4.9%. Property, casualty and accident premiums decreased slightly (by 0.1%). The insurance industry is the largest institutional investor in the European Union and in 2013 had over €8.5 trillion of assets under management (a 3.2% increase from 2012). The Booklet also breaks down the total European gross written premiums i.e. 60% is represented by life assurance, casualty and accident insurance comprise 30%, and health insurance accounts for the remaining 10%. 

In its press release, Insurance Europe notes that concerns remain in respect of the impact that Solvency II will have on long term investors.

A link to the Key Facts Booklet is here.

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