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
Insurance transformation - Modernising the claims function
KPMG (led by Michael Daughton, Head of Risk & Regulatory) explore some of the drivers for claims transformation in today’s market, identify the opportunities and barriers, and share key considerations to help insurance organizations on their transformation journey.
Upcoming Insurance CFO event: 19 June
A reminder that our next Insurance CFO event is scheduled for 19 June at 12.30 in our IFSC offices. The session will cover opportunities to utilise Generative AI in insurance finance functions - invitations have been issued separately. Please feel free to get in touch with your KPMG contacts if you need any further details.
Insurance accounting advisory quarterly - Understand reporting under IFRS 17 and IFRS 9
The KPMG Global IFRS Institute have analysed the full-year reports of 53 insurers across various jurisdictions and summarised the key observations on:
- The IFRS 17 and IFRS 9 accounting policies, disclosures and significant judgements;
- The impacts of IFRS 17 on key performance indicators; and
- Transition to IFRS 17 and IFRS 9.
An in-depth analysis focusing on the accounting practices adopted by insurers in Ireland will be released in due course.
Controls transformation – How to optimise and automate your risk and control lifecycle
Today, the drive for growth alongside changing technologies, risks, regulations and ways of working has left some organisations struggling to handle their controls. Organisations should strive for a controls framework with a clear purpose that can effectively and efficiently reduce risk and enable impactful decision-making.
In this white paper, the KPMG Risk Consulting team (led by Michael Daughton, Head of Risk and Regulatory) discuss how organisations can achieve a control framework with a clear purpose that can effectively and efficiently reduce risk and enable impactful decision making and we explain how KPMG can help your organisation on its transformation journey.
Delivering a high performing board
The KPMG Board Leadership Centre hosted its latest event in Dublin, led by Ryan McCarthy, KPMG Ireland Audit Partner and Board Leadership Centre Lead. The event featured a keynote speech by Professor Tim Rowley, who has extensive experience in board membership and strategic management. During the subsequent panel discussion, Gary McGann (Chair of Aon Investment Holdings Ireland and Sicon) and Linda Hickey (Senior Independent Director at Kingspan, Non-Executive Director at Cairn Homes, and Greencore) shared insights. They all agreed that robust discussion is crucial for effective board performance.
Central Bank of Ireland updates
CBI: Climate change – adapting and planning for a different world
On 15 May, the Central Bank of Ireland (the Central Bank) published a speech given by the Governor Gabriel Makhlouf at the Environmental Protection Agency’s Annual Climate Change conference entitled ‘Climate Change – adapting and planning for a different world’. The speech covers the challenges Ireland and the economy is facing due to climate change.
European Insurance and Occupational Pensions Authority Updates
EIOPA: Digitalisation in the EU Insurance Market
On 30 April, the European Insurance and Occupational Pensions Authority (EIOPA) published a report on the digitalisation of the European insurance sector (EIOPA-BoS-24/139). The report presents the results of a digitalisation market monitoring survey launched by EIOPA in March 2023, as well as insights from a Eurobarometer survey on customers' attitudes to digitalisation. EIOPA received 209 responses to the survey from organisations across 22 EU member states. Their responses were based on their status in 2022, and EIOPA notes, therefore, that the most recent digital developments, such as generative AI, may not have been fully captured in responses.
EIOPA: Report on Supervision of Prudent Person Principle Under Solvency II
On 2 May, EIOPA published a peer review report (PDF, 1MB) (EIOPA-BoS-24/146) on the supervision of the prudent person principle (PPP) under the Solvency II Directive (2009/138/EC), together with a factsheet and a press release. The PPP, which is set out in Article 132 of the Solvency II Directive, requires insurance and reinsurance undertakings to invest only in assets whose risks they can thoroughly understand, monitor and manage. When investing, insurers must also act in the best interests of policyholders while ensuring the overall security, liquidity and profitability of the portfolio.
EIOPA: IORP Risk Dashboard highlights market risks as key concern for occupational pension funds
On 2 May, EIOPA published the second edition of its Occupational Pensions Risk Dashboard. The dashboard shows that the exposure of Institutions for occupational retirement provisions (IORPs) to market and asset return risk is to remain at a high level due to market volatility and real estate market vulnerabilities.
EIOPA: Technical Advice on Solvency II Delegated Regulation Review
On 30 April, the European Commission (the Commission) published (PDF, 0.5MB) its formal request for technical advice from EIOPA on the review of specific items in Commission Delegated Regulation (EU) 2015/35 (Solvency II Delegated Regulation), with a covering letter. The Commission requests that EIOPA deliver its technical advice by 31 January 2025 in relation to the areas summarised in the first two bullet points and by 30 June 2025 in relation to the area summarised in the third bullet point.
EIOPA: Insurance Risk Dashboard
On 14 May EIOPA published its May 2024 Insurance Risk Dashboard. It notes that while overall risks in the insurance sector are at medium levels and stable there are pockets of vulnerability due to real estate sector risks and market uncertainty.
UK Updates
FCA: Finalised insurance guidance on supporting customers in financial difficulty
On 11 March, the Financial Conduct Authority (FCA) published a review of travel insurance signposting rules for consumers with medical conditions which concluded that the signposting intervention has had a positive, albeit lower than we expected, impact on the market. They estimate that the intervention resulted in an additional 21,000 policy sales.
FCA: Financial Lives cost of living (Jan 2024) recontact survey
On 10 March, the FCA published a summary of their findings from a survey undertaken in January 2024 to understand the financial impact of the increased cost of living on adults across the UK.
PRA: Occasional consultation paper: April 2024
On 30 April, the Prudential Regulation Authority (PRA) published a consultation paper which sets out the PRA’s proposals to make minor amendments to PRA rules and to add a new rule to the Policyholder Protection Part of the PRA Rulebook.
PRA: What’s next? Bulk annuity insurers
On 25 April, the PRA published a speech by Lisa Leaman given at Westminster and City’s 21st Annual Conference on Bulk Annuities.
PRA: PRA Regulatory Digest - March 2024
On 2 April, the PRA published their regulatory digest, which is aimed at people working in the UK financial services industry and highlights key regulatory news and publications delivered for the month.
PRA: Solvency II Review – Matching adjustment reform implementation considerations
On 15 April, the PRA published an update to respond to clarifications requested by firms in their responses to its consultation paper ‘Review of Solvency II: Reform of the Matching Adjustment’.
PRA: Measuring climate-related financial risks using scenario analysis
On 17 April, the PRA published an article exploring how financial institutions can use scenario analysis to quantify climate change risks.
PRA: Key elements of the 2024 CCP supervisory stress test
On 19 April, the PRA published an article outlining the key elements of the Bank of England’s 2024 Supervisory Stress Test of Central Counterparties.
UK FS regulators publish their AI strategies
UK regulators have published their strategies for the regulation of artificial intelligence within financial services. Overall, they have welcomed the government's approach and no new regulation has been proposed. Both the Bank of England/ Prudential Regulation Authority and Financial Conduct Authority determined that they already have appropriate frameworks in place to support the government's principles. However, they have acknowledged that this will need to be kept under review. See more details in this article.
Other European and International Supervisory Authority Updates
IAIS: Newsletter April 2024
On 30 April, the International Association of Insurance Supervisors (IAIS) has published its newsletter for April 2024 which includes the work carried out so far on embedding values of Diversity, Equity and Inclusion within the IAIS and sharing its good practice globally amongst other topics.
IE: Insurance Industry call on European Commission to deliver Solvency II deal
On 14 May, Insurance Europe (IE) announced that it has written to the European Commission to emphasise how crucial it is that the technical discussions surrounding the EU's Solvency II review maintain alignment with the political agreement and the goals of the EU regarding improving competitiveness, financing the green and digital transitions, the Capital Markets Union, and climate change mitigation.
ECON: Report on Proposed Framework for Financial Data Access
On 30 April, the European Parliament's Economic and Monetary Affairs Committee (ECON) published its report on the proposed Regulation on a framework for financial data access (FIDA Regulation or FIDA). ECON announced that it had adopted the report on 18 April 2024. It published a draft version of the report in December 2023. Financial data access refers to the access to and processing of business-to-business and business-to-customer data, on customer request, across a wide range of financial services and products. FIDA aims to enable such data sharing and third-party access in line with EU data protection and consumer protection rules.
EC: Calculating Technical Provisions and Basic Own Funds for Q2 2024 reporting under Solvency II
On 14 May, Commission Implementing Regulation (EU) 2024/1289, which lays down technical information for calculating technical provisions and basic own funds for reporting with reference dates from 31 March 2024 until 29 June 2024 under the Solvency II Directive (2009/138/EC), entered into force.
EU: Corporate Sustainability Due Diligence Directive
On 24 May, the European Council adopted the Corporate Sustainability Due Diligence Directive. This is the final step in the legislative process, subject to signature and publication in the Official Journal of the European Union. The European Council explained that the directive introduces obligations for large companies (more than 1 000 employees with a turnover of more than €450 million) regarding adverse impacts of their activities on human rights and environmental protection. The new rules concern not only the companies’ operations, but also the activities of their subsidiaries, and those of their business partners along the companies’ chain of activities... Once the Directive is in force, member states will have two years in which to transpose it into national law. Application will then be on a staggered basis, starting in 2027 for the largest companies.
EIOPA Q&A Updates
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.
04 April: Reporting Templates
EIOPA clarified in Q&A (#3067) that financial conglomerates shall report according to the form defined by the coordinator including the reporting unit.
04 April: Reporting Templates
EIOPA clarified in Q&A (#3066) that, based on the regulation 2022/2454 “The ‘sector’ shall present the split between the following sectors: — public sector — financial sector — corporate sector divided by the NACE code”. The public sector and financial sector shall also be reported based on the NACE code.
04 April: Reporting Templates
EIOPA clarified in Q&A (#3065) that Article 2(18) of Directive 2002/87/EC defines intra-group transactions as “all transactions by which regulated entities within a financial conglomerate rely directly or indirectly on other undertakings within the same group or on any natural or legal person linked to the undertakings within that group by close links, for the fulfilment of an obligation, whether or not contractual, and whether or not for payment”.
04 April: Reporting Templates
EIOPA clarified in Q&A (#3062) that in accordance with paragraph 1.4 of the Part I of the Annex II of Commission Implementing Regulation 2022/2454 and for the completion of reporting, “the value of the item shall be stated in accordance with the sectoral rules of the entity within the group” unless otherwise specified.
04 April: Reporting Templates
EIOPA clarified in Q&A (#3061) that for template FC.07, the instruction provided under section 8 of Annex II of Regulation (EU) 2022/2454 specifies that “if the country, sector or currency is not relevant, the figures may be reported under an ‘Other’ category”. Also, for the templates FC.08, the amount reported shall be based on all equity and bonds held by the financial conglomerate.
04 April: Reporting Templates
EIOPA clarified in Q&A (#3060) which methodology shall be used for determining the value of exposure to be reported, in particular for repo/reverse repo and derivatives in relation to the template “FC.06 Risk Concentration - Exposure by counterparties”.
09 April: S.08.01
EIOPA clarified in Q&A (#2915) that they expect the new field C0371 (Currency of price) to be always filled in if the undertaking is paying (or receiving) currency A for the notional amount (currency B). The currency of the price is A. The currency of the notional amount is B, reported in (C0370). C0371 is not to be filled in case there is there no currency.
10 April: S.06.02
EIOPA clarified in Q&A (#2942) that the cell 0085 (Contribution of solo (notional) SCR to group SCR) in template S.34.01 does not cover entities as described in article 335(1) e, f and 336 c,d,e.
10 April: Technical Provisions (TPs), Reinsurance
EIOPA clarified in Q&A (#2830) whether withheld funds should be considered a reinsurance payable or a deposit from reinsurer. They also clarified whether a reduction of the withheld funds balance due to settlement of claims covered by the reinsurance agreement be considered a reinsurance premium cash flow in the best estimates and net out the reinsurance benefit cash flow (recoverable) or should the funds withheld be treated outside the technical provisions on the Solvency II balance sheet.
26 April: S.04.03, S.04.04, S.04.05
EIOPA clarified in Q&A (#3017) the meaning of the template underwriting entity includes insurance and reinsurance undertakings, EEA branches and non-EEA branches.
26 April: S.26.13
EIOPA clarified in Q&A (#3009) the values to include should be “Monetary”. However the “Pure” metric allows to report a monetary amount. The correction will be made in the next revision of the taxonomy.
26 April: S.14.03
EIOPA clarified in Q&A (#2973) that if an undertaking identifies the cyber coverage, it should apply good risk management practices and isolate the cyber coverage as an add-on to main product. If the cyber coverage is recognised, it should not be regarded as a form of silent cyber coverage.
26 April: Technical Provisions (TPs), Reinsurance
EIOPA clarified in Q&A (#2783) which data the field "C0250 -Insurance policies" has to be filled and what would that mean from a reinsurer perspective.
Further information
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.
