Insurance Insights October 2024

KPMG updates

Inside Insurance - Video Series

View KPMG’s exclusive interview series that delves into the dynamic world of the insurance sector. Through candid conversations with industry leaders and our own experts, we explore the pressing topics shaping the future of insurance. 

KPMG 2024 Insurance CEO Outlook

The KPMG 2024 Insurance CEO Outlook provides a comprehensive analysis of the current state and future prospects of the global insurance sector. Conducted by KPMG Global, this thought leadership piece offers valuable insights that are particularly relevant to the Irish market, highlighting the key trends, challenges, and opportunities that insurance CEOs are focusing on. Download the full report.

Understanding climate risk reporting

This KPMG report (authored by Dr. Barry O’Dwyer (Director, KPMG Sustainable Futures) and the KPMG Sustainable Futures team) highlights the impact of new regulations like the Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy on climate risk reporting. It emphasizes the need for robust methodologies and data inputs to assess climate impacts and ensure compliance. The report offers expert insights and support for organizations at various stages of their sustainability journey, encouraging them to engage with KPMG’s multidisciplinary team for effective climate scenario analysis.

European Regulatory Radar

The new issue of European Regulatory Radar brings you the latest updates impacting financial services providers in the region. Complementing the UK Regulatory Radar series, European Regulatory Radar provides an overview of the wider economic and political environment, progress across the regulatory agenda and deep-dive articles on some of the most important regulatory developments.

Quarterly Brief Q3 2024 Irish Valuation Newsletter

KPMG Valuations - Ireland are pleased to present the Quarterly Brief, a publication that offers objective market data, which will keep readers abreast of the latest developments in the relevant financial markets.

Time to empower the CSO

The role of Chief Sustainability Officers (CSOs) and Heads of Sustainability has shifted from being seen as a cost to a strategic necessity due to increasing sustainability regulations. In this article, KPMG (led by by Russell Smyth, Partner and Head of Sustainable Futures, and the KPMG Sustainable Futures team) emphasizes that with increasing regulations like the Corporate Sustainability Reporting Directive (CSRD) and the International Sustainability Standards Board (ISSB), CSOs now lead extensive ESG disclosures. The report highlights the need for CSOs to have the authority and resources to drive ESG performance improvements, integrate sustainability into business strategies, and generate value for the business. Empowering CSOs is crucial for guiding companies towards a sustainable and resilient future.

Getting to grips with ESRS

KPMG (led by Lorraine McCann, Managing Director, and the KPMG Sustainable Futures team) notes that with the introduction of the European Sustainability Reporting Standards (ESRS) under the CSRD, companies face new challenges in sustainability reporting. The report highlights the need for robust methodologies and data inputs to comply with these standards. It also underscores the importance of integrating sustainability into business strategies and ensuring transparency in ESG disclosures.

Cracking down on greenwashing

The EU Green Claims Directive aims to combat greenwashing by requiring companies to substantiate, communicate, and verify environmental claims using robust, science-based methods. It sets clear criteria to ensure claims are reliable, comparable, and verifiable across the EU. In June 2024, the Council of the EU adopted its stance on the directive, marking a significant step towards combating greenwashing.

Shane O’Reilly (Managing Director, KPMG Sustainable Futures) and the KPMG Sustainable Futures team provide insights into the directive’s impacts on corporations and outline the requirements for compliance.

DORA and definition of ICT service provider

KPMG’s Risk Consulting Partner and Digital Operational Resilience Act (DORA) Co-Lead, Jackie Hennessy and the Risk Consulting team have reviewed the Joint Statement on DORA issued by the Association for Financial Markets in Europe (AFME) and other industry bodies on the definition of Information and Communications Technology (ICT) service providers and have summarised the findings. The Statement highlights ongoing divergence in interpreting ‘ICT Services’ under DORA and urges the European Supervisory Authorities (ESAs) to reinstate guidance. It also suggests a potential entity-level class exemption for certain financial entities. With the continuing evolution of the regulation, Hennessy advises that preparation will need to continue for some time to come. 

Decoding the ESA’s opinion of the Register of Information

The ESAs published their opinion on 15 October 2024, regarding the rejection by the European Commission of the Register of Information (ROI) Implementing Technical Standards (ITS). The rejection, dated 3 September 2024, was based on the proposed mandatory use of the Legal Entity Identifier (LEI) to identify ICT third-party service providers under Article 3(5) and (6) of the draft ITS3. The KPMG Risk Consulting team have reviewed the publication and have summarised the key messages.

European Insurance and Occupational Pensions Authority Updates

EIOPA: 2024 Joint Report on principal adverse impacts disclosures under the Sustainable Finance Disclosure Regulation

On 30 October, the European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) published their third annual Report on disclosures of principal adverse impacts under the Sustainable Finance Disclosure Regulation (SFDR). The Report assesses both entity and product-level Principal Adverse Impact (PAI) disclosures under SFDR. The ESAs note that these disclosures aim at showing the negative impact of financial institutions’ investments on the environment and people and the actions taken by asset managers, insurers, investment firms, banks and pension funds to mitigate them.  

EIOPA: Draft advice on one-to-one capital weight for EU insurers’ crypto holdings

On 24 October, EIOPA launched a public consultation on its draft technical advice on standard formula capital requirements for crypto assets. In response to the European Commission’s Call for Advice, EIOPA examined EU insurers’ crypto holdings and the risk inherent in such holdings. In light of the findings of this analysis, EIOPA is proposing a 100% haircut to insurers’ crypto assets regardless of their balance sheet treatment and investment structure.   EIOPA invites stakeholders to provide their feedback on the Consultation Paper by responding to the questions via the online survey no later than 16 January 2025. 

EIOPA: Solvency II: Consultations

On 1 October the European Insurance and Occupational Pensions Authority (EIOPA) has published its first batch of consultation papers on technical standards relating to changes that are expected to be made to the regime under the Solvency II Directive once it is amended by proposed (COD). This batch consists of the following:

• Consultation paper on proposed regulatory technical standards (RTS) on liquidity risk management plans. They set out criteria defining which undertakings and groups should include medium and long-term analyses in their liquidity risk management plans, as well as specification on the content of plans and the frequency with which they should be updated.
• Consultation paper on proposed RTS to specify the criteria for the identification of exceptional sector-wide shocks.
• Consultation paper on proposed RTS on factors for identifying undertakings under dominant or significant influence and undertakings managed on a unified basis.
• Consultation paper on proposed Implementing Technical Standards (ITS) specifying the methodology to determine the set of scenarios to be used for the prudent deterministic valuation of the best estimate for life obligations with options and guarantees.
• Consultation paper on proposed RTS on relevant insurance and reinsurance undertakings with respect to the host member state's market.

Comments can be made on the proposals until 2 January 2025.

EIOPA: DORA: Oversight

EIOPA has published a press release announcing that the Joint Committee of the European Supervisory Authorities (ESAs) (that is, the European Banking Authority (EBA), European Securities and Markets Authority (ESMA) and EIOPA) has appointed a Director to lead their joint oversight under the Regulation on digital operational resilience for the financial sector (DORA). From 1 October 2024, Marc Andries will lead the Joint Committee's new joint Directorate in charge of oversight activities for critical third-party providers (CTPPs) established by DORA. In his role as DORA Joint Oversight Director, Mr Andries will be responsible for implementing and running an oversight framework for critical information and communication technology (ICT) CTPPs at a pan-European scale, contributing to the smooth operations and stability of the EU financial sector.

EIOPA: Revised Work Programme 2025

EIOPA has published its revised single programming document 2025-27 (SPD), which includes its annual work programme for 2025. EIOPA's operational priorities for 2025, together with due dates for specific workflows. EIOPA highlights the policy work that it is expected to deliver for a number of legislative initiatives, including the Solvency II Review and the Insurance Recovery and Resolution Directive (IRRD), as well as possible work stemming from the retail investment strategy and the Regulation on key information document (KID) for packaged retail and insurance-based investment products (PRIIPs), and the Insurance Distribution Directive (IDD).

EIOPA: Consultation on supervising the liquidity risk management of IORPs

EIOPA published a Consultation Paper which sets out EIOPA’s draft Opinion on the supervision of Institutions for Occupational Retirement Provision’s (IORPs) liquidity risk management. The draft Opinion encourages a risk-based, forward-looking and proportionate approach and expects supervisors to monitor and assess the liquidity risk exposures of IORPs and to ensure that IORPs exposed to material liquidity risks fulfil some key principles regarding the management of this exposure, including by stress testing cash flows, drawing up contingency plans and creating a buffer of liquid assets to cover any shortfalls.

EIOPA: Monthly update of the symmetric adjustment of the equity capital charge for Solvency II – end - September 2024

On 4 October, EIOPA published its most recent technical information on the symmetric adjustment of the equity capital charge for Solvency II with reference to the end of September 2024.

EIOPA: Monthly technical information for Solvency II relevant risk-free interest rate term structures – end - September 2024

On 4 October, EIOPA published its most recent technical information on the relevant risk-free interest rate term structures (RFR) with reference to the end of September 2024.

Other European and International Supervisory Authority Updates

IAIS: Newsletter September

On 30 September, the International Association of Insurance Supervisors (IAIS) published their newsletter for September. The newsletter covers various in focus and topical areas for the Insurance sector such as AI, Emerging Markets and Developing Economies, Holistic Framework assessments performed by supervisors, and providing updates on memberships. events, forums and committee activities. 

IE: Key messages for the EU trilogues on the Retail Investment Strategy (RIS)

On 2 October, Insurance Europe (IE) published its views on the European Parliament’s and Council’s positions on the Insurance Distribution Directive (IDD) and Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation. The insurance industry believes that it is crucial to avoid any direct or indirect EU ban on inducements, streamline requirements, prevent further bureaucracy and preserve insurers’ freedom to design products and set prices.