Insurance Insights April 2024

Following an extensive engagement period, the Central Bank of Ireland (“Central Bank”) has issued a Consultation Paper on the Consumer Protection Code (“CPC” and “the Code”). The KPMG Consulting team (Gillian Kelly - Head of Consulting, Yvonne Kelleher - Managing Director and Derek Hegarty- Head of Financial Services Regulation) explain the proposals and their implications in this article.

This Consultation Paper will allow for stakeholders and the Central Bank to engage with each other on the proposals suggested by the Central Bank. The consultation period will run until June 2024. The Central Bank aims to deliver an updated and modernised Code that reflects the constantly changing financial environment of today. The Central Bank has clarified the renewed mandates of the CPC by providing insight into how firms should meet their modernised regulatory obligations.

KPMG will be conducting a panel discussion and Q&A in May 2024 on the contents of the Consultation Paper and its impact on firms and their consumers.

The Institute of Internal Auditors (“IIA”) released the 2024 Global Internal Audit Standards (“Standards”) on January 9, 2024. The Standards are the main component of the International Professional Practices Framework (“IPPF”). The Standards will be effective from 9 January 2025 which provides an opportunity for Internal Audit (“IA”) functions to reflect on current practices.

IA functions will experience a period of transformation as they integrate the 2024 Global Internal Audit Standards into their processes. If you want to stay ahead of the curve and prepare for compliance with these Standards by January 9, 2025, a gap assessment is essential. KPMG (led by Patrick Farrell, Risk Consulting Partner, Michael Daughton - Head of Risk and Regulatory and Colm Laird – Risk Consulting Director) has the expertise to assist you in understanding and integrating these Standards into your department, enabling your team to stay focused on the audit plan for the year. 

The KPMG Internal Audit team hosted a webinar on the 2024 Standards. They provided insights into the 2024 Standards, discussed the main changes between the International Standards for the Professional Practice of Internal Auditing (the 2017 Standards) and the 2024 Standards, and provided practical steps for implementation of the new requirements.

The risk landscape is changing. Organisations today are faced with increasing and evolving risks from various sources. In addition, demands for greater governance and transparency are growing, both from regulators and the public-at-large.

Powered Risk (led by Shane Garahy – Risk Consulting Partner and Rosalind Norton – Risk Consulting Director) is KPMG's flagship offering for risk transformation, integrating our forward-looking point of view on risk management and deep industry knowledge with leading cloud technology and global delivery capabilities. It is designed to help your organisation identify, assess, mitigate, monitor, and report on risk and compliance exposure to enhance stakeholder trust.

Enhancing the way Risk and Control Self-Assessment (“RCSA”) is conducted presents many opportunities for companies - to protect their business, employees and customers; to support growth; to reduce cost and to build and protect brand reputation.

The RCSA process has long been the ‘bread and butter’ of the risk practitioner and as risk management embeds and matures within companies, employees without risk in their title have also come to appreciate the important role they play in the risk management lifecycle.

In this white paper, the KPMG Risk Consulting team envision a future where RCSAs are dynamic, efficient, and value-adding. Discover the possibilities and practical steps towards this future.  

As a follow on from our previous IFRS 17 insights series we’re delighted to launch our quarterly insurance accounting advisory series which will focus on a broader suite of accounting and reporting matters impacting finance functions. The first publication in the new series is available on the KPMG website.

This is the KPMG audit podcast series, where KPMG explore the relevant issues, opportunities and new ways of working shaping the audit profession's future. 

In today’s fast-paced landscape where Environmental, Social and Governance (“ESG”) considerations are shaping investor perceptions, corporate reputation and sustainable business practices, the focus on Conduct Risk has never been more intense.

Whilst navigating the landscape of ethical conduct is complex, there are profound implications for an organisation’s ESG performance if prompt action is not taken. The KPMG Risk Consulting team explores why organisations need to adapt swiftly to stay ahead of the curve to manage and mitigate the drivers of poor conduct and culture.

The Joint Committee of the European Supervisory Authorities (ESAs) has published a press release announcing a voluntary dry run exercise to prepare industry for the next stage of implementation of the Regulation on digital operational resilience for the financial sector ((EU) 2022/2554) (DORA). The ESAs provided more information in a fact sheet published alongside the press release. The ESAs are carrying out the exercise to help financial entities prepare for establishing their register of information, gathering the information specified in the ESAs' final report on draft implementing standards (ITS) on registers of information and reporting the register of information to their NCAs. The ESAs are holding an introductory workshop on 30 April, and financial entities wishing to take part in the exercise are invited to contact their NCA by the launch date on 31 May, though NCAs may also reach out directly to financial entities and invite them to participate.

The European Insurance and Occupational Pensions Authority (EIOPA) has published a supervisory statement on the supervision of reinsurance concluded with third country insurance and reinsurance undertakings. It has also published a related impact assessment. EIOPA aims to highlight the risks arising from the use of reinsurance provided by reinsurers operating under regulatory regimes that have not been recognised by the European Commission as equivalent to the Solvency II regime and to propose a risk-based approach limiting their effect. The supervisory statement outlines supervisory expectations in the following areas:

• Assessment of the business rationale for using third-country reinsurance and early supervisory dialogue.
• Assessment of the insurance undertaking's risk management system regarding the use of third-country reinsurers.
• Assessment of the reinsurance agreement.
• Tools to mitigate any additional risks.

EIOPA has published a consultation paper on the 2023/24 reassessment of natural catastrophe (“Nat Cat” or “NatCat”) risks in the standard formula under the Solvency II Directive. EIOPA explains that, in the light of climate change, new scientific insights and recent catastrophic events, it is important to ensure that the natural catastrophe parameters of the standard formula are still valid.

Insurers' capital requirements for natural catastrophe underwriting risk must continue to reflect the expected impact of climate change. As a result, EIOPA has reviewed natural catastrophe parameters in the standard formula to see if previous parameters need recalibrating in the light of new evidence. It has also assessed whether new perils or regions should be included. Following the reassessment exercise, EIOPA proposes:

• New risk factors for 25 perils and regions across five perils (flood, hail, earthquake, windstorm and subsidence). By way of example, flood risk is to be recalibrated for ten countries.
• Including more countries in the standard formula for which certain natural catastrophe risks were previously not covered.
• Including wildfire, coastal flood and drought in the future as new perils to be covered under the standard formula.

Comments can be made on the proposals until 20 June 2024. EIOPA plans to submit an opinion on natural catastrophe risks to the European Commission (“EC”) by the end of 2024. 

EIOPA has published a press release announcing the launch of the 2024 EU-wide stress test for the insurance sector. The 2024 stress test will subject insurers in the European Economic Area (“EEA”) to a hypothetical scenario of severe but plausible adverse developments in financial and economic conditions.

EIOPA developed the scenario in close co-operation with the European Systemic Risk Board (“ESRB”). It presumes a renewed build-up or continuation of geopolitical tensions together with a broad range of knock-on effects. EIOPA has translated this narrative into a set of market and insurance-specific shocks to assess the insurance sector's resilience to them from both capital and liquidity perspectives.

Participants have until mid-August 2024 to calculate their results based on the prescribed scenario and submit them to the relevant national supervisor. Once the results are submitted, EIOPA will undertake a quality assurance process to validate the results, which is expected to last until the end of October 2024. The outcome of the 2024 stress test will be published in December 2024.

EIOPA has launched a survey on taxonomy implementation starting dates. The aim is to gain in-depth technical insights into potential challenges that stakeholders might face if the starting date of a new supervisory reporting taxonomy were to be set for 1 January of the following year instead of Q4 of the current year. The survey closes on 14 June 2024.

On 27 March 2024, the Financial Conduct Authority (“FCA”) published an article which sets out the findings from our review which assesses firms’ claims-handling processes for valuing vehicles which have been stolen or written-off (“total-loss” claims).

On 01 March 2024, the Prudential Regulation Authority (“PRA”) published their Regulatory Digest which summarises and highlights key regulatory news and publications delivered for the month for people working in the UK financial services industry. 

On 01 March 2024, the PRA published a link to the new PRA Rulebook website will be launched on Wednesday 10 April 2024, and will be available at https://www.prarulebook.co.uk/.

On 28 March 2024, the PRA published the 2024 external Minimum Requirements for own funds and Eligible Liabilities (“MRELs”) for all firms with a resolution entity incorporated in the UK for which an MREL above minimum capital requirements has been communicated.

For more on any of the items above, or any Insurance-related queries, contact Brian Morrissey, Head of Insurance. We'd be delighted to hear from you.