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.
KPMG updates
KPMG 2023 Insurance CEO Outlook report
In an unpredictable operating environment characterized by geopolitical tensions, high inflation and rising costs, CEOs continue to face an array of challenges and opportunities. With change becoming almost a constant, KPMG International (led by Dr. Frank Pfaffenzeller, Global Head of Insurance - KPMG International) surveyed 128 insurance CEOs for the KPMG 2023 Insurance CEO Outlook. This was to gain a deep insight into their views and perspectives on the industry and wider economic landscape now and over the next three years.
Ireland's future leaders on COP28 - Call for more accountability
In October 2023, KPMG ran a global survey to hear what young people had to say on the private sector's role in COP28 negotiations, and the priorities for senior business leaders to focus their discussions on. The responses - both globally and regionally - offer some compelling pointers on how private companies can help tackle climate change and its associated social challenges.
In this report (led by KPMG Managers - Caoibhe Gralton, Niamh McLernon and Stephen Bigger) we delve into the perspectives of Ireland’s future leaders.
ESG in insurance: Supporting the energy transition to net zero
As COP28 will remind us there is an urgent need to fast-track the energy transition, something which will be impossible without the support of insurers and reinsurers. Insurers provide a social good by helping people and organizations to manage risks and cope with crises.
Public perceptions of the industry are often shaped by things going wrong and rising premiums, such as for electric vehicles. There is a danger that the insurance industry could be seen as holding back the energy transition, but we believe this can be countered through positive action such as by upgrading product ranges to support clean energy, working to improve the pricing of risks and providing early-stage advice in the development of energy transition projects.
KPMG (led by Roger Jackson - Global Insurance ESG Lead, KPMG International) discuss this further.
Modernising the actuarial function
In this report, KPMG insurance professionals (led by Laura Gray - Global Head of Actuarial and Partner) explore some of the drivers for actuarial transformation in today’s market, identify the opportunities and barriers, and share key considerations to help insurance organisations on their transformation journey.
Modernising the finance function
In this report, KPMG insurance professionals (led by Mark Longworth - Global Head of Insurance Advisory) explore the drivers for finance transformation in today’s market, identify the potential opportunities and barriers, and share key considerations to help insurance organisations on their transformation journey.
Central Bank of Ireland updates
Intermediary Times
On 17 November, the Central Bank of Ireland (the ‘Central Bank’) published the second issue of its Intermediary Times for 2023. The publication contains information on a number of topics including:
- Authorisation initiatives:
- Mortgage Intermediary renewals; and
- Authorisation Webinars.
- Updates on the Fitness and Probity (F&P) requirements;
- Information on the Central Bank of Ireland portal (Portal); and
- Professional Indemnity Insurance awareness.
Retail Intermediary Roadshow
On 23 and 24 November, the Central Bank held its annual Retail Intermediary Roadshow in Dublin and Galway. The Central Bank presented on a number of topics namely:
- Expectations on Consumer Protection;
- Authorisations & Supervision;
- Policy Updates – Consumer Protection Code Review; and
- Fitness & Probity Standards.
Quarterly Bulletin 2023:4 - Effects of tighter monetary policy
On 19 December the Central Bank published its final Quarterly Bulletin of 2023.
On the launch of the Quarterly Bulletin, Robert Kelly, Director of Economics and Statistics said: “The Irish economy has slowed into a phase of growth in-line with its current medium-term potential. Inflation has fallen significantly during 2023 and the effects of the initial commodity price shock have faded. As momentum in the domestic economic activity decreases, and the effects of tighter monetary policy continue to emerge, the process of disinflation is expected to proceed at a more gradual pace over the next two years”.
The Central Bank notes that even though economic activity measured by GDP will likely contract for the year as a whole, the domestic economy as measured by modified domestic demand will likely grow. Headline inflation has fallen in 2023 and is expected to return to 2.1% in 2025.
Public consultation on enhanced Administrative Sanctions Procedure
Following a twelve-week public consultation, on 13 December the Central Bank published a Feedback Statement and consolidated Guidelines relating to the enhanced Administrative Sanctions Procedure (ASP).
The ASP is the Central Bank’s primary tool for carrying out investigations and inquiries, and imposing administrative sanctions if it determines that firms or individuals that it supervises have breached financial services legislation.
The Central Bank noted that while much of the ASP remains the same, the Central Bank (Individual Accountability Framework) Act 2023 changed the ASP in several ways. In some circumstances, the Central Bank can now take direct enforcement actions against individuals, and where a settlement is agreed and is based on admissions, a High Court order is now required to confirm the sanctions imposed.
Other practical changes include allowing for earlier disclosure of documents to subjects of investigations and the Central Bank has now published the methodologies for determining monetary penalties.
Private Motor Insurance Report of National Claims Information Database
On 13 December the Central Bank published the fifth annual Private Motor Insurance Report of the National Claims Information Database (NCID). The NCID compiles aggregate data received from insurers, allowing the Central Bank to publish an annual report containing analysis on the cost of premiums, the cost of claims, the aggregated financial performance of the private motor insurance sector, and key settlement channel information. The Report captures data from calendar years 2009 to 2022 and provides key statistics on the private motor insurance industry in Ireland.
EIOPA updates
ESAs provide clarity to consumers on sustainable finance
On 30 November, the three European Supervisory Authorities (EBA, EIOPA, ESMA - ESAs) published an interactive factsheet that answers consumers’ most frequently asked questions regarding sustainable finance. The factsheet provides information to consumers that are considering purchasing financial products such as loans, investments, insurance etc. that have sustainability features.
Amendments to sustainability disclosures for the financial sector
On 4 December, the three ESAs published the final report amending draft Regulatory Technical Standards (RTS) to the Delegated Regulation supplementing the Sustainable Finance Disclosure Regulations (SFDR). The ESAs have put forward new social indicators and streamlining the framework for the disclosure of principle adverse impacts of investment decisions on the environment and society. ESAs also suggested new product disclosures regarding ‘greenhouse gas emissions reduction targets and technical revisions to the SFDR Delegated Regulation.
Example of new method to calculate Credit Risk Adjustment
On 6 December, EIOPA published an example of the new method to calculate the Credit Risk Adjustment (CRA). EIOPA will begin to use the new method for the calculation of the CRA as of January 2024 with the first results being published at the end of February 2024.
Updated representative portfolios
On December 6, EIOPA published the updated representative portfolios that is due to be used for calculation of the volatility adjustments (VA) to the relevant risk-free interest rate term structures for Solvency II. EIOPA will start using these updated representative portfolios for the calculation of the VA end of March 2024, and will be published at the beginning of April 2024.
Fit and proper assessments
On 7 December, the three ESAs (EBA, EIOPA & ESMA) launched a second consultation related to the joint guidelines on the system for the exchange of information relevant to fit & proper assessments. The consultation covers amendments extending the scope of the joint guidelines to legal persons to bring in coverage of data subjects. The guidelines aim to increase the efficiency of the information exchange between sectoral supervisors harmonising practices and covering both natural and legal persons. The consultation is open until the 15 January 2024.
Policy mandates under the Digital Operational Resilience Act
On 7 December, the three ESAs launched a public consultation on the second batch of policy mandates under the Digital Operational Resilience Act (DORA). The second batch of policy mandates includes four draft technical standards, a set of draft implementing standards and two sets of guidelines.
The policy instruments aim to ensure a consistent and harmonised framework in the areas of major ICT-related incident reporting, digital operational resilience testing, ICT third-party risk management and oversight over critical ICT third party providers. The consultation is open until 4 March 2024.
IORP’s Prudent Person Rule Compliance
On 8 December, EIOPA published a follow up report to a 2019 peer review on the application of the Prudent Person Rule for Institutions for Occupational Retirement Provision (IORPs) according to the IORP II requirements. The report assessed how NCAs have implemented the recommended actions identified in 2019.
Activities of innovation facilitators across the European Economic Area
On 11 December, the three ESAs published their report on innovation facilitators. The term innovation facilitators includes innovations hubs and regulatory sandboxes. The report identifies a number of benefits and challenges relating to the operation and design of such innovation facilitators while also presenting recommendations addressed to national competent authorities (NCAs), the ESAs and the European Commission to enhance the role and efficiency of innovation facilitators in the financial section across the European Economic Area (‘EEA’).
Insurer’s and pension funds’ challenges amid shifting macro landscape
On 11 December, EIOPA published its December 2023 Financial Stability Report. The report examines the challenges faced by insurers and pension funds as a result of the changing macroeconomic landscape. The report covers key developments in the sector and focuses on the following areas:
- Liquidity risks for the insurance sector;
- Portfolio rebalancing after the monetary normalisation;
- Liquidity needs of occupational pension funds relating to interest rate derivatives; and
- Impact of past recessions on insurers and lessons for the future.
Greenwashing in the insurance and occupational pension sectors
On 12 December, EIOPA launched its public consultation on the draft Opinion on sustainability claims and greenwashing. EIOPA notes the principles within the draft Opinion aim to bring a more effective and harmonised supervision of sustainability claims across Europe thereby limiting the risk of greenwashing in the insurance and occupational pensions sectors. EIOPA is inviting stakeholders to provide their comments via a online survey with a deadline of 12 March 2024.
Prudential treatment of sustainability risks
On 13 December, EIOPA launched a consultation on the prudential treatment of sustainability risks. The consultation paper represents the second phase in EIOPA’s step-by-step approach concerning the expected mandate under the Solvency II Directive. EIOPA is inviting stakeholders to provide feedback on the consultation paper via the EU survey by 22 March 2024.
Sustainable Finance Conference 2023: Catastrophe Data Hub
On 14 December, EIOPA launched a Catastrophe Data Hub at its Sustainable Finance Conference 2023. The Data Hub is an open-source collection of catastrophe risk data at European level. It provides European-wide data on insured losses for a number of weather events and EIOPA believes it will be a valuable source of information for insurance supervisors, the insurance sector as well as policy and decision-makers.
Setting value-for-money benchmarks
On 15 December, EIOPA launched its public consultation on the proposed methodology for setting value-for-money benchmarks for unit-linked and hybrid insurance products. The work is part of the EIOPA toolkit that it began developing in 2020 to provide insurance supervisors with more risk-based tools to enhance their ability to identify certain products that may not provide value for money. The consultation is open for comments until the 15 March 2024.
Retail investment products in insurance and pensions
On 18 December, EIOPA published its December 2023 report on the costs and past performance of retail investment products within its remit. The report is based on a sample of over 1,000 investment products from 173 insurers, 200 personal pension products and 1,400 occupational pension funds. EIOPA and ESMA will organise an event on 10 January 2024 to discuss the findings of the two institution’s separate costs and past performance reports.
EMIR equity option exemption
On 20 December, the ESAs published a draft regulatory technical standards (‘RTS’) under the European Market Infrastructure Regulation (EMIR) where they are proposing a two-year extension to the equity option exemption from bilateral margining as well as issue a no-action opinion. The draft RTS aims to provide further explanation to market participants on how to handle equity options as from 4 January 2024, the date on which the current temporary exemption is to expire.
Policyholder protection schemes
On 14 December, following a consultation between February and April 2023, the IAIS published its Issues Paper on the roles and functioning of policyholder protection schemes (‘PPSs’). The paper provided an updated overview of global practices regarding PPSs and their roles in insurance resolution and a variety of related activities. In addition, the Issues Paper also describes current practices for PPSs and it is intended to serve as a guide for jurisdictions considering establishing a PPS or modifying an existing PPS.
Other updates
EU plan to deliver 25% reporting reduction
On 1 December, Insurance Europe (IE) published its response to the European Commission’s commitment to reducing regulatory reporting by 25% and shared its recommendations. In addition to supporting the proposal, IE also expressed disappointment that while the European Commission’s work programme for 2024 has the aim to reduce reporting requirements that nothing material has been proposed to achieve this target to date.
Look back at IAIS conference
On 30 November, the International Association of Insurance Supervisors (IAIS) have published its newsletter for November. This month’s edition provides a look back at the recent IAIS Annual Conference and highlights the additional initiatives completed this month.
Response to the IAASB on the proposed ISSA 5000
On 1 December, the IAIS published its response to the International Auditing and Assurance Standards Board (IAASB) on the proposed International Standard on Sustainability Assurance (ISSA) 5000 – General Requirements for Sustainability Assurance Engagements. IAIS recognises the importance of sustainability reporting rapidly becoming a topic of global important and that its reliability is a key issue for stakeholders.
Global Insurance Market Report - 2023
On 6 December, the IAIS published its Global Insurance Market Report for 2023. The report highlights what IAIS believe to be the key risks and trends facing the global insurance sector. The report covers the following topics:
- Global Insurance Market Developments;
- Macroprudential Themes;
- Climate-Related Risks in the Insurance Sector;
- Individual Insurer Monitoring 2023;
- Global Reinsurance Market.
Regulation and supervision of AI/ML
On 7 December, the IAIS published a short summary of the thematic review of artificial intelligence and machine learning (AI/ML) undertaken by the IAIS FinTech forum on existing regulatory guidance. The report highlighted some possible supervisory concerns in relation to the use of AI/ML and Big Data by Insurers.
COP28 & Insurance Industry
On 13 December, IE reconfirmed its commitment to fighting climate change and overcoming climate protection gaps. This confirmation was delivered by the Director-General of Insurance Europe, Michaela Koller.
EU insurance resolution law
On 14 December, IE welcomed the improvements agreed by the European Council and Parliament to the Insurance Recovery Resolution Directive (‘IRRD’). Insurance Europe continued to question the need for such an extensive regulation given the existing regulation and safeguards that are in place. IE believe the IRRD will create a significant additional operational burden for many companies and requires resolution authorities to be established in all EU member states.
UK updates
Openness beats fragmentation
On 8 November, the PRA published a speech by Andrew Bailey which describes the benefits of openness and the risks posed by fragmentation for the world economy and financial stability. He talks about the role global standards play in supporting financial openness and outlines the value of co-operation and co-ordination in pursuit of the common goal of financial stability.
Transitional Measure on Technical Provisions
On 15 November 2023, the PRA published a statement highlights the PRA's recent invitation to insurance firms to recalculate the Transitional Measure on Technical Provisions.
How liquidity risks have evolved
On 16 November 2023, the PRA published a speech by Dave Ramsden. Dave considers the question: What are the implications of the end of the low interest environment for liquidity risk and what are the macroprudential policy options? These remarks provide insights into how liquidity risks have evolved and consider how policymakers can best identify and respond to these risks.
EIOPA Q&As
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 November: QRT S.14.02
EIOPA clarified in Q&A (#2766) that amounts receivable from employees should typically be treated as type 2 exposures. Insurance and reinsurance undertakings should however check whether these amounts are loans or bonds, which are covered in the spread risk sub-module, or fall under the list of type 1 exposures set out in Article 189(2) DR.
07 November: QRT S.14.02
EIOPA clarified in Q&A (#2761) that properties can be assigned to both risks simultaneously in S.06.04. R0020 shall only take properties into account while R0010 will also consider the transition risk from properties as part of the investments.
08 November: QRT S.14.02
EIOPA clarified in Q&A (#2742) that the definition of C0030 have two pieces of information which result in conflicting conclusion. The LOG is stating that: “[…] please report here the percentage of products in this category (measured by gross written premiums) that covers at least one aspect of climate-related perils, between 0 and 100".
09 November: QRT S.14.04 and S.14.05
EIOPA clarified in Q&A (#2837) that given that the Financial Stability sample encompasses mostly groups, the exemption of reporting by reinsurance solos should not significantly affect the aggregated results.
09 November: QRT S.12.02
EIOPA clarified in Q&A (#2815) that E.04.01 always has to be reported, also when no cross-border business exists. Please note that instructions have been updated to clarify.
09 November: QRT S.14.03
EIOPA clarified in Q&A (#2709) that C0030, C0050 and C0060 should in fact be unique, and option 24 should not be reported in a separate line.
27 November: QRT S.04.03
EIOPA clarified in Q&A (#2808) that if there is no activity outside the home country, these templates are not to be reported. This option in already reflected in S.01.01.
27 November: QRT S.04.03
EIOPA clarified in Q&A (#2796) that Specific codes are not strictly defined as they reflect internal approach of the reporting entity. However, to differentiate from other predefined codes, a dedicated pattern must be followed SC/{CODE}. You can find more details about different codes used in the model in section IV.3 Codes and Type of Codes of EIOPA Filling Rules.
27 November: QRT S.14.04
EIOPA clarified in Q&A (#2788) that semi-annual Financial stability shall be reported during Q2 and Q4. For the Q1 and Q3 periods, when reporting is not required, in the content of the submission QRT S.01.01 the option “Not reported other reason (in this case special justification is needed)" should be selected.
27 November: QRT S.14.02
EIOPA clarified in Q&A (#2776) that C0060 refers to all new contracts which have been written during the reporting year. This includes new contracts concluded in the reporting period and renewal of previous contracts accepted during the reporting period. In case all contracts would be 1-year contracts then columns C0050 and C0060 could be expected to be equal.
Further information
For more on any of the items above, or any Insurance-related queries, contact Brian Morrissey, Head of Insurance.
