KPMG updates
Insurance and aviation’s decarbonisation: Contrails
How insurers can help elevate the role of contrails in decarbonising aviation
In the report, KPMG (led by Christopher Brown, Head of Strategy) explores how insurers can support the aviation sector's decarbonisation efforts by focusing on contrails. Contrails, the vapor trails left by aircraft, are identified as one of the simplest and most cost-effective solutions to reduce aviation's climate impact. The report highlights that tweaking flight paths could significantly reduce contrail warming at minimal cost. Insurers can play a crucial role by supporting airlines in adopting these measures and addressing operational complexities.
Insurance Accounting Advisory Quarterly
Finance transformation for insurers - Harnessing AI
Insurance companies are navigating a digital future that is far more connected than the past. Insurance leaders understand the need to modernise their finance function to help achieve growth and strategic objectives.
KPMG (led by Niall Naughton, Financial Services Partner) discusses how AI can be leveraged to enhance various aspects of financial services and insurance, including automating claims, assessing risks, personalizing products and services, and combating cybercrime1. The report emphasizes that while many organisations have seen early success with AI, broader adoption is necessary to fully realise its benefits
Future of risk
Building a trusted risk function to succeed in a risker world
KPMG's report on the future of risk highlights the need for organisations to fundamentally transform their approach to risk management. As businesses face increasing reputational, environmental, regulatory, and societal challenges, traditional methods of risk management are no longer sufficient.
KPMG (led by Michael Daughton, Partner and Head of Risk and Regulatory) emphasises the importance of viewing risk as an enabler and asset that can drive stakeholder value.
Internal Audit Insights 2025
Key thematic areas to consider in 2025
The Internal Audit Insights for 2025 emphasises the need for internal audit functions to remain agile and responsive to change. As organisations continue to navigate a volatile and dynamic risk environment, the depth and breadth of threats have intensified, placing significant stress on risk and control frameworks.
KPMG (led by Patrick Farrell, Risk Consulting Partner) identifies key thematic areas and related risks that internal audit functions should consider when developing their 2025 audit plans. These areas include external pressures, operational challenges, technology, and regulatory-driven risks.
Global AI in finance report
Over half of organisations in Ireland now using AI across wider finance function
KPMG's Global Artificial Intelligence (AI) in Finance Report reveals that over half of organisations in Ireland are now using AI across their finance functions, with significant benefits such as better data-driven decisions, lower costs, and improved trend prediction.
In the report, KPMG (led by Keith Stafford, IT Audit Partner) highlights that AI adoption is most prevalent in treasury management, financial planning, accounting, tax, and risk management. Nearly half of the companies report that the return on investment (ROI) from AI initiatives meets or exceeds expectations.
2024 Technology and Telecommunication CEO Outlook
Cautious optimism backed by strategic planning
Following an extensive engagement period, KPMG has released the 2024 Technology and Telecommunication CEO Outlook. KPMG (led by Anna Scally - KPMG’s Technology, Media and Telecommunication (TMT) Sector Leader) explain the findings and their implications in this article.
This report provides a comprehensive overview into the objectives, challenges and strategies at the top of the agenda for technology and telecommunications Chief Executive Officers (CEOs).
Central Bank Updates
Central Bank December 2024 Insurance Insights
The Central Bank issued the December 2024 edition of the Insurance Insights.
The CBI notes that:
- From 2025, supervision of the (re)insurance sector (whether prudential, conduct, consumer protection, or financial crime related), will be undertaken on an integrated basis from within a single Insurance Directorate led by Seána Cunningham.
- Supervisory engagement will focus on pricing and underwriting discipline, reserving and capital adequacy; adherence to the requirements of the Individual Accountability Framework and the Consumer Protection Code;adequacy of product oversight and governance frameworks; operational resilience and DORA implementation, among others.
- (Re)insurance undertakings and other Financial Entities are required to submit their DORA Registers of Information, to the Central Bank by Close of Business Friday, 4 April 2025. The Registers of Information should contain information as at 31 March 2025. Further information on how to submit Registers of Information, via the Central Bank Portal, will be provided in Q1 2025.
- A revised “Notification Guidance for (Re)Insurance Undertakings when Outsourcing Critical or Important Functions or Activities under Solvency II” was issued in December 2024.
- The 2023 Solvency and Financial Condition Reports (SFCR) are now available on the Central Bank’s website.
European Insurance and Occupational Pensions Authority Updates
ESAs: DORA Application
The Joint Committee of the European Supervisory Authorities (ESAs) has published a statement calling on financial entities and ICT third-party service providers to advance their preparations so they are ready to comply with the Regulation on digital operational resilience for the financial sector (DORA) and its associated technical standards and guidelines from its application date on 17 January 2025. They expect financial entities to:
- Identify and address gaps between their internal set-ups and the DORA requirements in a timely way.
- Prepare for the new reporting obligations, including making their registers of ICT third-party providers' contractual arrangements available early in 2025 so that competent authorities can report them to the ESAs by 30 April 2025.
- Ensure they are equipped to classify and report their major ICT-related incidents from 17 January 2025.
The ESAs note that competent authorities are prepared to supervise the DORA requirements in a risk-based manner. The ESAs also invite ICT third-party service providers that consider they may meet the criticality criteria published in May 2024 assess their operational set-up against the DORA requirements. They indicate that the first designation of critical ICT third-party service providers is expected to take place in the second half of 2025.
EIOPA: Solvency II: Consultations on Technical Standards
The European Insurance and Occupational Pensions Authority (EIOPA) has published its second batch of consultation papers on technical standards, guidelines and a report relating to changes being made by the Solvency II amending Directive, which amends the regime under the Solvency II Directive. The batch consists of the following:
- Consultation paper on a report on biodiversity risk management by insurers. EIOPA is proposing a report that looks at how insurers identify, measure and manage biodiversity risks, and assesses undertakings' own risk and solvency practices.
- Consultation paper on a proposal for regulatory technical standards (RTS) on management of sustainability risks including sustainability risk plans.
- Consultation paper on guidelines regarding the notion of diversity for the selection of members of the administrative, management or supervisory body.
- Consultation paper on revised guidelines on undertaking-specific parameters. revised guidelines include amendments to correct legal references and to clarify and streamline the text without changing its intended meaning.
- Consultation paper on revised guidelines on market and counterparty risk exposures in the standard formula.
- Consultation paper on revised implementing technical standards (ITS) on the lists of regional governments and local authorities' exposures who are to be treated as exposures to the central government.
Comments can be made on the proposals until 26 February 2025. EIOPA will publish a report following the consultations, including revised proposals and a summary of stakeholder comments received.
UK Updates
FCA: DP24/1: Regulation of commercial and bespoke insurance business
On 04 November 2024, the Financial Conduct Authority (FCA) published a questionnaire with the aim of acquiring further feedback on discussion paper DP24/1.
FCA: FG24/5: Prudential assessment of acquisitions and increases in control
On 04 November 2024, the FCA published a questionnaire with the aim of acquiring further feedback on discussion paper DP24/1.
FCA: Quarterly Consultation Paper No. 44
On 8 July 2024, the FCA published a paper where they consult on proposed miscellaneous amendments to our Handbook. These tend to be minor changes, but they want to get feedback on their proposals.
FCA: Advice Guidance Boundary Review
On 15 November 2024, the FCA published their updated approach to help people access financial and investment support.
FCA: Multi-firm review of life insurers’ bereavement claim process
On 22 November 2024, the FCA published the findings of their multi-firm review of life insurers’ bereavement claim process.
PRA: Regulatory Digest
On 1 November 2024, the Prudential Regulation Authority (PRA) published their regulatory digest for November 2024.
PRA: Speeches
The PRA published the following speeches:
- Managing the present, shaping the future − speech by Clare Lombardelli, 25 November 2024.
- Beyond Faster Horses: Wholesale Financial Markets in the Digital Age – speech by Sasha Mills, 25 November 2024
- Back to the Future 2: Keeping inflation close to the 2% target − speech by Dave Ramsden, 20 November 2024
- Growth − speech by Andrew Bailey, 14 November 2024
- The Great Moderation 20 years on – and beyond – speech by Catherine L. Mann, 14 November 2024
PRA: Conclusion of the Solvency II Review
On 15 November 2024, the PRA published Policy Statement 15/24 finalising PRA rules and policy materials that will replace Solvency II assimilated law.
PRA: SS8/24 – Solvency II: Calculation of technical provisions
On 15 November 2024, the PRA published their expectations in respect of insurers applying simplifications to the best estimate and risk margin elements of the technical provisions.
FCA: Multi-firm review of life insurers’ bereavement claim process
On 22 November 2024, the FCA published the findings of their multi-firm review of life insurers’ bereavement claim process.
PRA: Solvency II: The PRA’s approach to Standard Formula adaptations
On 15 November 2024, the PRA published a statement of policy setting out the approach to adaptations relating to the Standard Formula, which is the default methodology for the calculation of the Solvency Capital Requirement (SCR) by UK Solvency II firms.
PRA: CP15/24 – Proposed changes to the UK Insurance Special Purpose Vehicles (UK ISPV) regulatory framework
On 15 November 2024, the PRA published their proposed reforms to the UK Insurance Special Purpose Vehicle (UK ISPV) regulatory framework, through a combination of changes to PRA rules, supervisory statements and statements of policy.
PRA: PS15/24 – Review of Solvency II: Restatement of assimilated law
On 15 November 2024, the PRA published their feedback to responses received on consultation paper (CP) 5/24 – Review of Solvency II: Restatement of assimilated law.
PRA: Solvency II: Volatility adjustment permissions
On 15 November 2024, the PRA published a statement of policy setting out the approach to granting regulatory permissions in relation to the volatility adjustment (VA), as well as variations to those permissions, and the circumstances in which the PRA may consider revoking a firm’s VA permission.
PRA: Solvency II: The PRA’s approach to insurance own funds permissions
On 15 November 2024, the PRA published a statement of policy (SoP) setting out the approach to granting the regulatory permissions contained in the Own Funds part of the PRA Rulebook. This SoP also sets out the PRA’s approach to variations to those permissions, and the circumstances in which the PRA may take the decision to revoke an Own Funds permission.
PRA: Solvency II: The PRA’s approach to the permissible recovery period for insurers to restore full cover for their SCR
On 15 November 2024, the PRA published a statement of policy (SoP) setting out the circumstances that could lead to the PRA declaring an exceptional adverse situation for the purpose of the Undertakings in Difficulty and Group Supervision Parts of the PRA Rulebook. The SoP also sets out the factors determining whether an insurer should be permitted to have an extension of the permissible recovery period during which it should take the necessary measures to restore full cover for its SCR including where an exceptional adverse situation has been declared.
PRA: CP16/24 – Remuneration reform
On 25 November 2024, the PRA published their amendments to the Remuneration part of the PRA Rulebook.
EIOPA Q&A
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.
12 December: QRT S.30.03
EIOPA clarified in Q&A (#2717) that with regards to QRT S.30.03, C0245 is to be reported by layer of treaty, not by line of business.
12 December: QRT PF.06.02
EIOPA clarified in Q&A (#3159) how to determine the bail-in eligibility of bonds and shares. They also stated that entities should be able to independently assess bail-in potential rather than relying on third-party resources.
12 December: QRT S.30.03
EIOPA clarified in Q&A (#3020) that C0420, C0430 and C0440 in S.30.03 should be expressed as a percentage of the premium ceded. They also stated the S.30.01 to S.30.04 templates will be reviewed in the next ITS amendment.
12 December: Articles 1(55a) & 164(b)
EIOPA clarified in Q&A (#3157) that companies operating in the power generation business are eligible for Qualifying Infrastructure Corporate Investment under Article 1(55a). However, they must also meet the criteria under Article 164(b).
Other European and International Supervisory Authority Updates
IAIS: Capital Standard, Insurance Cor and ComFrame
The International Association of Insurance Supervisors (IAIS) has published a press release announcing that it has adopted the first comprehensive global capital standard for insurance supervision, the Insurance Capital Standard (ICS). The ICS provides a risk-based measure of capital adequacy for internationally active insurance groups (IAIGs) and forms the quantitative element of the Common Framework (ComFrame) for the supervision of IAIGs. The specifics of the ICS have been adopted in Level 1 text, which identifies the overarching principles and concepts of the ICS, and Level 2 text, which provides detailed specifications. In addition, the IAIS has published the following supporting documents, including an ICS calibration document, ICS economic impact assessment and the resolution of public comments document.
The IAIS intends to begin developing a detailed ICS assessment methodology in 2025. In 2026, it will co-ordinate a baseline self-assessment by IAIS members of their progress in implementing the ICS and in 2027, it aims to initiate detailed jurisdictional assessments of ICS implementation.
IAIS: Market Report 2024
The International Association of Insurance Supervisors (IAIS) has published its global insurance market report (GIMAR) for 2024. The GIMAR reports on the outcomes of the IAIS' global monitoring exercise (GME), which is the IAIS' framework for monitoring risks and trends in the global insurance sector and assessing the possible build-up of systemic risk. Points of interest in the report include the following:
- Key risks and supervisory responses. The analysis in the report covers two key macroprudential themes: the impact of the current macroeconomic environment on the insurance sector and structural shifts in the life insurance sector.
- Climate-related risks. The report examines the insurance sector's exposure to transition risks in investment portfolios as well as the potential materiality of natural catastrophe (NatCat) risks.
- Maintaining solvency ratios. Life insurers are expected to maintain or improve solvency ratios through strong capital reserves and effective risk management, while non-life insurers are anticipated to sustain stable solvency ratios supported by robust underwriting and investment income.
- IAIS work in 2025. The IAIS will perform its second triennial review of the GME assessment methodology. It will also finalise the development of ancillary indicators on credit risk, derivatives, reinsurance, mark-to-model assets and revisions to the liquidity metrics, and publish a GIMAR special topic report on the potential financial stability implications of NatCat protection gaps.
In addition, the IAIS will publish an issues paper on the structural shifts in the life insurance sector. It intends to issue a consultation paper in March 2025, which will focus on supervisory concerns arising from trends and aims to assist supervisors in developing strategies to mitigate associated risks.
OJEU: DORA: Register of Information
The Official Journal of the European Union (OJEU) has published European Commission (EC) Implementing Regulation laying down implementing technical standards (ITS) with regard to standard templates for the register of information under Article 28(9) of the Regulation on digital operational resilience for the financial sector (DORA). Financial entities are required under Article 28(3) of DORA to maintain and update a register of information relating to all contractual arrangements on the use of ICT services provided by ICT third-party service providers. The Regulation enters into force on 22 December 2024 (that is, 20 days after publication in the OJEU).
IAIS/FSI: Parametric Insurance
The IAIS has published a note jointly with the Financial Stability Institute (FSI) on parametric insurance. The note examines using parametric insurance coverage for natural catastrophe (NatCat) risks. It draws on insights from a survey of 12 insurance supervisory authorities and seven market participants, with a focus on non-agricultural applications for households and small and medium-sized enterprises (SMEs). Parametric insurance presents a promising tool in narrowing NatCat protection gaps, providing rapid payouts triggered by predefined, measurable parameters of NatCat events. Despite its potential, the adoption of parametric insurance remains limited due to challenges such as basis risk, product complexity and regulatory barriers. Among other things, the note sets out recommendations addressed to authorities on improving the adoption of parametric insurance against NatCat risks. These include authorities:
- Undertaking efforts to enhance data availability and quality, and enhancing analytical and modelling capabilities by leveraging digital innovation (such as AI and machine learning).
- Supporting implementation of risk-based pricing, underpinned by enhanced information on risks and coverages for better consumer outcomes.
- Empowering consumers by raising risk awareness and coverage understanding through financial literacy initiatives.
- Reducing regulatory uncertainty by establishing an enabling regulatory and supervisory framework that sets out clear supervisory expectations and guidance for index selection, trigger definition and payouts.
- Fostering co-operation with relevant stakeholders to address data limitations, ensure reliability of triggers and facilitate timely payouts to support broader adoption of parametric products.
The IAIS and the FSI recognise that addressing NatCat protection gaps requires co-ordinated efforts from governments, international organisations, the insurance industry, insurance supervisors and consumers.
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.