Financial Services Regulation and Compliance – Insurance April 2022
CBI response to Pearse Doherty, TD on Business Interruption Insurance, posted 12 April 2022
This month, the Central Bank of Ireland (CCR) responded to email from Pearse Doherty, TD dated January 26, 2022 regarding business interruption insurance (BII). The CBI explained that it continues to engage with insurers to ensure that all valid BII claims are dealt with promptly and compensation paid where appropriate. Regarding the insurers’ treatment of wage subsidies and other deductions from BII claim settlement amounts, the CBI advised Deputy Doherty that, like UK insurers, Irish insurers had deducted state aid which were directly attributable to a specific business expense, but had not deducted those not directly attributable to a specific overhead. The CBI also referred to the recent FBD High Court test case, noting that the final approach taken by insurers in Ireland will depend on the final outcome of the case regarding quantum.
EIOPA – Consultation Document – Draft Guidelines on Incorporating Client Sustainability Preferences into the Suitability Assessment under the Insurance Distribution Directive
On 13 April 2022, EIOPA invited stakeholders to provide feedback on its draft guidelines on incorporating client sustainability preferences into the advice process under Directive 2016/97 on insurance distribution (IDD) by 13 May 2022 (. The draft guidelines were developed under Commission Delegated Regulation (EU) 2021/1257 amending the IDD (the CDR). The draft guidelines aim to promote consistent application of the CDR across Member States and to ensure that insurance products are properly marketed to consumers in line with their sustainability preferences. The guidelines explain the concept of consumer “sustainability preferences” and explain how insurers can align product offerings more closely with consumer needs. The consultation period is relatively short, as EIOPA intends to finalize the draft guidelines by August 2, 2022 – the application date of the BER.
EIOPA finalizes revision of its guidelines on contract limits and valuation of technical provisions
Following divergent practices identified by EIOPA in its 2020 Solvency II review, EIOPA published, on April 21, 2022, revised guidelines on contract limits and the valuation of technical provisions. The revised guidelines introduce new guidelines and modify the current guidelines relating to the determination of contract limits and the valuation of technical provisions. For contractual limits, this includes revisions to guidance on assessing the discernible effect of a financial guarantee on contract economics and contract severance. For the valuation of technical provisions, this includes revisions to guidance on expense modelling, option and guarantee valuation and policyholder behavior modelling. The revised guidelines will apply from 1 January 2023, unless otherwise decided by the competent national authorities.
EIOPA reviews the costs and past performance of insurance and pension products
EIOPA published its fourth report on the costs and past performance of insurance and pension products on April 5, 2022. From an insurance perspective, the report examined a sample of 760 investment products based on insurance, and notably included an analysis on a limited sample of products with durability features for the first time. Trends identified in the report included a shift to hybrid and unit-linked products from more traditional profit-sharing products in 2020 – likely encouraged by the COVID-19 pandemic and low interest rates. At the same time, the report found that the average returns of unit-linked and hybrid products were higher than those of profit-sharing products, and while high-risk products generally generated higher returns, low-risk products generated very low or even negative returns.
EIOPA – Data collection on the prudential treatment of climate-related adaptation measures in non-life insurance
After a recent pilot exercise on adaptation to climate change in non-life underwriting and pricing, EIOPA announced a data collection to determine if there is a possibility of treatment dedicated to pillar 1 of adaptation measures related to climate in Solvency II non-life standard underwriting. risk formula. Data collection will examine how climate-related adaptation measures influence premium risk. Companies will be contacted by the competent national authorities to participate in the data collection. Data collection will end on June 1, 2022.
EIOPA calls for changes to stress test disclosure regime
EIOPA published its opinion on insurers’ disclosure of individual stress test results on April 12, 2022. Currently, EIOPA is communicating the results of European Union-wide stress test exercises assessing the resilience of the European insurance sector on an aggregate basis. EIOPA Opinion proposes an amendment to Solvency II to allow EIOPA to disclose the results of individual companies with the aim of strengthening market discipline, increasing participant engagement and contributing to conditions fair competition among insurers and across the financial sector.
Speech by Petra Hielkema (April 7, 2022): Investing for the Future in a Low-Return, High-Uncertainty Environment
In a keynote address on April 7, 2022, EIOPA President Petra Hielkema addressed the challenges and opportunities for investment decisions facing the insurance industry and the importance of thinking long term, particularly in the face of a low interest rate environment and uncertainty. His speech included comments on the impact of the COVID-19 pandemic on the insurance industry, the war in Ukraine, the opportunities of the transition to a green economy and digitalisation, the adaptation of regulatory frameworks and the supervision of (re)insurers in run-off.
EIOPA publishes monthly technical information
On April 5, 2022, EIOPA published technical information on the term structures of the relevant risk-free interest rates (RFR) with reference to the end of March 2022. In addition, EIOPA has published the RFR curve of the Russian ruble using the current underlying interest rates as of March 31, 2022. EIOPA has indicated that it monitored the situation and reliability of interest rates and trading of government bonds bonds in Russian rubles.
Sanctions imposed in response to the crisis in Ukraine
Since February, the EU has imposed a number of sanctions in response to the crisis in Ukraine. As the crisis develops and sanctions continue to evolve, the CBI is publishing details of new restrictive measures/sanctions adopted in this regard, along with any associated EU/UN guidance, on their dedicated webpage.