Brian Morrissey, Head of Insurance, and our insurance team have compiled a collection of KPMG's latest publications and articles which focus on developments in, and issues facing the insurance industry. Also included are recent publications from the CBI, EIOPA, and other European bodies.
CBI’s Digitalisation in Insurance Survey
The Central Bank of Ireland (“Central Bank”) issued a survey in October 2022 to help understand the implementation and impact of digitalisation across the insurance value chain. The survey represents approximately 70% of the Irish Insurance sector, with 44 life, non-life and reinsurance firms taking part. In the report, KPMG's experts in insurance, technology, risk and regulation (Jean Rea, Partner in Actuarial and Applied Intelligence; Patrick Farrell, Partner: Risk Consulting and Liam Cotter, Partner: Management Consulting) have summarised these findings
Consumer Protection in 2023
The Consumer Protection Outlook Report 2023, released by the Central Bank, highlights key drivers of consumer risk for firms, which includes poor business practices, inadequate disclosures, changing operational landscape, technology-driven risks, and shifting business models. The KPMG Risk Consulting team (led by Gillian Kelly, Head of Consulting and Yvonne Kelleher, Managing Director: Risk Consulting) explores the key themes of consumer protection in the report.
Audit Committee Survey
To gain a better understanding of how audit committee members are managing their expanding workload and oversight responsibilities amid this uncertainty and disruption, KPMG surveyed Irish audit committee members and chairs. The Irish views were collected as part of a global survey conducted by the KPMG Board Leadership Centre and Audit Committee Institute in February and March 2023. This was led by Niall Savage (Partner, Consumer Markets) and Maria Diver (Director: Audit).
Central Bank of Ireland updates
Administrative Sanctions Procedure
On 5 July 2023, the Central Bank co-hosted an event in the Law Society of Ireland in which the Central Bank outlined the approach to implementation of key aspects of the updated Administrative Sanctions Procedure (“ASP”). Central Bank of Ireland Director of Enforcement and Anti-Money Laundering Seána Cunningham addressed the consultation and the important changes to the ASP which was followed by a questions and answers session.
CP 154 Consolidated Guidelines in respect of the Central Bank’s ASP
On 22 June 2023, the Central Bank issued Consultation Paper 154 ("CP 154"). CP 154 is the updated draft guidelines in respect of the ASP and consolidates the existing procedures originally published in 2018, along with the ASP Sanctions Guidance 2019. The introduction of the Central Bank Individual Accountability Framework (“IAF”) Act has resulted in a number of necessary procedural amendments to the ASP. The updates to the ASP will incorporate additional safeguards to further fortify the existing process and is in recognition of the expanded population of individuals coming within the scope of ASP under the IAF Act.
The closing date for feedback on CP 154 is 14 September 2023.
Quarterly Bulletin No2. 2023
On 21 June 2023, the Central Bank published their second quarterly bulletin for Q2 2023 (PDF, 3.1 MB). The bulletin provides details on the Central Bank’s latest assessment of the Irish and Euro area economies. The bulletin notes that the domestic economy is operating at capacity, food and energy prices are easing while core inflation is still rising. Internationally, after peaking at elevated levels towards the end of 2022, inflation is declining in major advanced economies.
Financial Stability Report June 2023
On 22 June 2023, the European Insurance and Occupation Pensions Authority (“EIOPA”) published its June 2023 Financial Stability Report (PDF, 4.1 MB). The report notes the key developments and risks in the European insurance and occupational pensions sector. EIOPA notes that the European economy is currently experiencing a new period of high uncertainty and elevated financial stability risk. Persistent inflation, the fraught geopolitical landscape and rising financing costs – also in the wake of the recent financial turmoil – pose challenges to growth prospects in Europe and the business conditions of financial institutions. Despite the challenging environment, insurers and pension funds have remained resilient.
Annual Report 2022
EIOPA published its Annual Report 2022 (PDF, 2.2 MB) on 13 June 2023. The report sets out EIOPA’s activities and achievements for the past year including information on integrating sustainable finance considerations across all areas of work, enhancing the quality and effectiveness of supervision, and identifying, assessing, monitoring, and reporting on risks to the financial stability and conduct of business and promoting preventative policies and mitigating actions.
Consults on an Open Insurance use case: an insurance dashboard
EIOPA launched a consultation on 24 July 2023 in relation to an open insurance case by publishing a discussion paper (PDF, 718 KB) examining the key features of an insurance dashboard. Open insurance potentially could benefit consumers, the sector and its supervision. This discussion paper explores operational aspects of an insurance dashboard for supervisors, including data flows, stakeholder roles and responsibilities, standardisation and interoperability, data protection and ethical considerations. This case is intended as a theoretical example to assist the supervisory community and market participants get a better view on open insurance and related issues.
Supervisors across Europe continue to strengthen POG supervision
On 20 July 2023, EIOPA published a peer review report on product oversight and governance (POG). This review is assessing how national supervisors in the EEA and monitoring the application of POG by insurance manufacturers. As a result of this review, EIOPA has issued a set of recommended actions to national supervisors with a view to building existing foundations to enhance POG supervision. EIOPA will continue to monitor the implementation of the recommended actions.
Report on the activities of Colleges of Supervisors 2022
EIOPA published its report on 13 July 2022 regarding the activities of Colleges of Supervisors for 2022. The report highlights the importance of efficient and effective coordinated supervision of cross-border insurance groups in the EU and provides an outline of the major developments and key topics discussed in colleges. Key topics discussed was the current macro-economic environment particularly inflation and the rise of interest rates. Other topics discussed were ESG, ICS and IFRS17.
Methodological principles of insurance stress testing of cyber risks
On 11 July 2023, EIOPA published their fourth paper on the methodological principles of insurance stress testing. The paper is focussed on the cyber risk component and assessment of insurers’ financial resilience in a cyber incident scenario. These principles cover insurers’ own cyber resilience and the vulnerabilities related to cyber underwriting risk.
Consultation Paper on its Supervisory Statement of Supervision of Reinsurance
On 10 July 2023, EIOPA released their consultation paper on its supervisory statement on supervision of reinsurance concluded with third country insurance and reinsurance undertakings.
The aim of this supervisory statement is to ensure that a high-quality and convergent supervision is ensured regarding insurance undertakings using reinsurance arrangements with third-country reinsurers both from equivalent and non-equivalent countries.
The (draft) statement outlines the supervisory expectations for national supervisors and thendustry in the event of using reinsurance from third countries.
The statement addresses:
- ·Supervisory expectations incl. assessment of the business context when using reinsurance from third countries;
- Importance of early supervisory dialogue;
- Supervisory considerations on how to assess reinsurance agreements;
- Undertakings’ risk management systems in relation to the use of third country reinsurers; and
- Tools to mitigate any additional risks.
Feedback must be submitted by 10 October 2023.
Research sheds light on why households and businesses are reluctant to take NatCat insurance
On 05 July 2023, EIOPA published a staff paper which explored the reasons for a limited uptake of natural catastrophe (NatCat) insurance in Europe. Following on from previous studies, this paper explored the ‘demand-side’ barriers that may prevent consumers from buying NatCat insurance and possible solutions, consumer-tested, to overcome these barriers. The aim of these papers is to improve society’s resilience against natural catastrophes. Comments and feedback should be provided by 05 October 2023.
Risk-free interest rate term structures
EIOPA published their monthly technical information on the relevant risk free interest rate term structures with reference to the end of June 2023. Publishing this report ensures a consistent calculation of technical provisions in Europe.
Equity capital charge for Solvency II
EIOPA released the technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of June 2023.
Delegation agreement between two national supervisors
On 04 July 2023, EIOPA issued their opinion on a delegation agreement between two national supervisors, the Dirección General de Seguros y Fondos de Pensiones (DGSFP) and De Nederlandsche Bank N.V. (DNB). The opinion relates to the delegation of tasks and responsibilities of group supervision of Aegon N.V. Group (Aegon) – an insurance group which is currently supervised by the DNB and which operates in the Netherlands, Spain, Portugal and in other countries outside the EU. It was determined that that its appropriate for the DNB to continue to perform group supervision of Aegon for six-months, as Aegon announced its plans to move its legal seat to a third country having finalised the sale of its Dutch insurance entities. Following this, the DGSFP will become the group supervisor – for the period between the sale of the Dutch business and the move of its legal seat.
Change to the minimum amount of professional indemnity insurance cover and financial capacity intermediaries need under IDD
On 03 July, EIOPA published draft regulatory technical standards (RTS) (PDF, 808 KB) adapting the base euro amounts for the professional indemnity insurance cover and financial capacity of intermediaries under the Insurance Distribution Directive (“IDD”). This report follows on from a consultation paper issued earlier in 2023 and incorporates the feedback provided by stakeholders. Some concerns have been provided to EIOPA and these issues will need to be addressed either in a future review of IDD or as part of the European Commission’s development of the implementing legislation
Other European and International Supervisory Authority Updates
IAIS: Newsletter June 2023
On 30 June 2023, the International Association of Insurance Supervisors (“IAIS”) published its newsletter for June 2023 (PDF, 2.3 MB). The newsletter provides a summary of a number of matters that the IAIS is focused on currently.
IAIS: Published its Global Monitoring Exercise Document
On 29 June 2023, the IAIS published its Global Monitoring Exercise document (PDF, 2.3 MB). The objective of the exercise is to assess global insurance market trends and developments and to detect the possible build-up of systemic risk in the global insurance sector.
IAIS: Public consultation on Insurance Capital Standard as a prescribed capital requirement.
On 23 June 2023, the IAIS released its public consultation on insurance capital standard as a prescribed capital requirement. The IAIS is seeking feedback on the global insurance capital standards ahead of its adoption as a group prescribed capital requirement for internationally active insurance groups at year-end 2024.
IE: Insurance Europe response to ECB-EIOPA climate protection gap
On 28 June 2023, Insurance Europe (“IE”) published their response (PDF, 134 KB) to the European Central Bank-EIOPA paper on climate protection gap. The response highlights the insurance industry’s key perspectives on ways to tackle the climate protection gap.
PRA: Review of Solvency II: Adapting to the UK insurance market
On 29 June 2023, the Prudential Regulation Authority ("PRA") published a consultation paper which sets out the PRA’s proposals to deliver significant reforms for Solvency II, which the PRA considers will lead to a more competitive and dynamic insurance sector in the UK, while maintaining high standards of policyholder protection.
PRA: Insights from PRA thematic review of general insurance reserving and capital modelling
On 23 June 2023, the PRA published a follow-up to the letter to Chief Actuaries of general insurance firms and Lloyd’s Managing Agents regulated by the PRA setting out observations of a review on how firms responded to our October 2022 letter. Firms should take into account our observations as they prepare for their next and subsequent reserving and capital assessment exercises.
PRA: Letter from Charlotte Gerken ‘Feedback on the PRA’s preliminary thematic review'
On 15 June 2023, the PRA published a letter to Chief Risk Officers of life insurance firms regulated by the PRA on the findings from the recent preliminary thematic review work on funded reinsurance arrangements.
PRA: Financial stability risks from the non-bank sector - speech by Lee Foulger
On 21 June 2023, the PRA published a speech by Lee Foulger. Lee Foulger sets out the importance of the international work programme to enhance financial firms’ resilience. He then explains the importance of macroprudential regulators taking a ‘system-wide’ perspective to addressing risks to financial stability as well as the Bank of England’s plans to do so, via its system-wide exploratory scenario exercise.
FCA: The Consumer Duty
On 28 June 2023, the Financial Conduct Authority ("FCA") issued a reminder to all firms in scope, that the Consumer Duty comes into force soon on 31 July 2023. The Consumer Duty will set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first.
FCA: Good and poor practice in the general insurance market
On 3 July 2023, the FCA published an article reviewing how home and motor insurers are supporting customers in financial difficulty and handling claims. They found examples of good practice, but also areas where firms need to improve.
FCA: Insurance guidance on supporting customers in financial difficulty
On 3 July 2023, the FCA published (PDF, 528 KB) a Policy Statement which summarises feedback received in CP23/1 on insurance guidance for supporting customers in financial difficulty.
Please see below for EIOPA’s response to recent queries which have been raised by the public for further clarification on the Solvency II requirements. The Solvency II requirements may change or become more prescriptive over time.
07 June: S2 Reporting – Reporting Templates
EIOPA clarified in Q&A (#2678) that the Complementary Identification Code (“CIC”) categorisation of an Exchange-Traded Products (“ETP”) depends on the type of the ETP. This could be either classified as CIC 4 (Exchange-Traded Funds), CIC 5 (Exchange-Traded Commodity / Exchange-Traded Note – see also Q&A 2299).
12 June: S2 Reporting – QRT S.36.01
EIOPA clarified in Q&A (#2686) that in the S.36.01 template, the ‘NC’ column code prefix is intentional and is used to align from the modelling perspective the IGT (Internal Governance Templates) templates with the ones for FICOD (“Financial Conglomerates Directive”).
15 June: S2 Reporting – QRT S.17.01
EIOPA clarified in Q&A (#2699) that in the S.17.01 template, the reporting of SE.17.01 in 2.8 taxonomy is applicable as of 31.12.2023.
For more on any of the items above, or any Insurance-related queries, contact Brian Morrissey, Head of Insurance.