Thursday, 16 January 2020

AMICE response to Solvency II 2020 Review Consultation

Evolution of Europe’s insurance regulatory environment to benefit policyholders
 The Association of Mutual Insurers and Insurance Cooperatives in Europe (AMICE), the voice of the mutual and cooperative insurance sector in Europe, has today responded to the European Insurance and Occupational Pensions Authority’s (EIOPA) call for advice for the 2020 Review of Solvency II. In its response, AMICE welcomed the overall success of Solvency II as a regulatory framework, and agrees with EIOPA that this review should not result in a revolution, but in the adjustment of certain elements. It is important that this is not used as an opportunity to increase the regulatory burden; it is an opportunity to improve the current system in the light of four years’ experience since its implementation in 2016.
 Following a request by the European Commission, EIOPA in October 2019 published an 878-page consultation paper which includes suggestions to update almost all aspects of Solvency II. The consultation comprises 19 separate topics, which can be divided broadly into three parts:
 ▪ the review of the long-term guarantee measures; ▪ the potential introduction of new regulatory tools in the Solvency II Directive; ▪ revisions to the existing Solvency II framework.
 AMICE has highlighted three key areas in its response to EIOPA:
 1) Long-term measures and equity risk 
 This review is an opportunity to reduce procyclicality and rebalance capital requirements for certain investment classes, ensuring that our members can continue to play their vital long-term role in the European economy and that capital can be accessed in line with CMU objectives. AMICE has made several proposals to assist in achieving a proper reflection of the net risk profile of the long-term business model, and issued two position notes with concrete proposals for easy- to-apply fixes for the volatility adjustment (VA) and long-term equity. We are particularly concerned that the VA and extrapolation proposals need to be tackled in line with stakeholders’ interests, as we have detailed in our response.
 2) Macroprudential policies 
 The insurance sector has proven to be resilient in the face of economic challenges. There is little evidence that it contributes to systemic risk, particularly within the mutual sector. With these points in mind, AMICE believes that the regulatory tools within the Solvency II system are ensuring a robust insurance sector and providing appropriate protection for policyholders. In particular, the powerful governance tools, including the ORSA, in Pillar 2 of Solvency II are robust safeguards.
 3) Proportionality 
 Proportionality is embedded in the Solvency II Directive and the Delegated Regulation, but its application has been limited. This has resulted in a disproportionate regulatory burden, particularly for small and medium-sized insurers (many of which are mutuals), which does not properly reflect their risk profile or provide commensurate policyholder protection. AMICE supports proposals to increase the thresholds at which Solvency II applies to small insurers, to apply an appropriately calibrated regime for medium-sized insurers, and to ensure that the principle of proportionality works consistently in practice. AMICE has focused on proportionality within Solvency II for many years, and recently has made detailed submissions for practical solutions such as a regulatory “toolbox”.

 The highly technical topics presented in the EOIPA consultation have been discussed intensely by AMICEand its members prior to its collective response, which was submitted earlier today.
 The AMICE membership notes that while it supports the overarching principles of Solvency II - to ensure that EU policyholders enjoy the same level of protection regardless of where they buy insurance - the current regulation presents some shortcomings for the mutual and co-operative insurance sector. Since the introduction of Solvency II, mutual and co-operative insurers have called for a considered and proportional approach to its evolution.
 In its response to the call for advice for the 2020 review of Solvency II, AMICE recognises that some technical corrections are necessary, but also highlights that:
▪ progress should follow a principle-based regime: supervisory convergence should not lead to more legislation, and should deliver simplification of existing rules wherever possible, not result in unnecessary and overly burdensome complication. A measured approach to the introduction of new tools should be applied, particularly where existing tools are already fit for purpose, or still being developed;
 ▪ changes should not assume a ‘one size fits all’ approach.
While market consistency is desirable, regulatory reform should be appropriate, representative, responsive and proportional; and
 ▪ the cost of change is ultimately borne by the policyholder. The administrative burden of the proposed changes will be significant, and the impact of further regulatory reform should be taken into account.
 AMICE’s Secretary General, Sarah Goddard, commented:
 “Historically, AMICE has been deeply involved in the consultation around the development of Solvency II, particularly the implementation of the proportionality principle. Proportionality is particularly important for the mutual and co-operative insurance sector, alongside more technical aspects such as long-term equity, the volatility adjustment and interest rate risk. We have highlighted these issues in our response to the Solvency II 2020 Review consultation.” She continued, “This review is an important programme in ensuring that the European regulatory system works the way it should do, including fair treatment of all insurers, and AMICE has worked with members across Europe to ensure they are fully represented and their views appropriately reflected in our response. We look forward to a positive and ongoing dialogue with EIOPA and other stakeholders on regulatory reform.”

Didem Ozsoy Dirican appointed CEO NN Hayat ve Emeklilik in Turkey on an ad interim basis

As of 1 February 2020, Didem Ozsoy Dirican, currently Chief Commercial Officer of NN Hayat ve Emeklilik, will be appointed CEO NN Hayat ve Emeklilik on an ad interim basis and subject to regulatory approval. This follows, Marius Popescu’s appointment as Head of Performance and Analytics within NN Group as of the same date.
Didem joined NN Hayat ve Emeklilik in 2013 as Strategy and Business Development Manager. She held various roles including Chief Bancassurance and Corporate Sales and most recently, Chief Commercial Officer. Prior to joining NN Group, Didem held senior commercial roles in Aviva and AK Emeklilik in Istanbul.

NN in Turkey

NN has had a market presence in Turkey since 2009 and offers mandatory and voluntary pensions, life and health insurance. Sigorta Cini is our insurance retail broker for the Turkish market.

Monday, 13 January 2020

ESAs proposals on PRIIPs: going from bad to worse

Insurance Europe has serious concerns about the review currently being undertaken of the Packaged Retail Investment and Insurance-based Products (PRIIPs) Regulatory Technical Standards (RTS). Proposals put forward in a consultation by the Joint Committee of the European Supervisory Authorities (ESAs) on changes to the PRIIPS RTS would make things worse for both consumers and insurers.
Rather than improve the quality of information in the PRIIPs Key Information Document (KID) — which is intended to inform consumers about insurance-based investment products (IBIPs) — the proposals would:
  • Increase the complexity of the methods and presentation of information, making it even more difficult for consumers to understand.
  • Lead to misleading figures being given to consumers.
  • In general, overload consumers with information.
Insurance Europe also has serious concerns about the “quick-fix” approach taken in the ESAs’ consultation. It is vital that any new measures address the underlying problems with the PRIIPs KID and do not attempt to find superficial and ineffective solutions.
The ESAs therefore must conduct a more well-considered and better evidenced approach when proposing amendments. It needs to be clearly demonstrated that consumers will benefit from any alterations, given the significant compliance costs those changes will impose on insurers.
Fundamental changes that are required to address flaws in the PRIIPs KID should therefore only be considered as part of the official overall review foreseen by the PRIIPs Regulation. Such amendments require a thorough impact assessment and proper, holistic consumer testing of all aspects of the KID, to ensure that consumers are provided with meaningful information.
Insurance Europe’s other concerns include:
  • The introduction of any interim measures must be avoided, as they would incur additional compliance costs without achieving any added value for consumers. Repeatedly changing the presentation and the contents of the PRIIPs KID only confuses consumers and undermines their trust in the PRIIPs KID.
  • Proposals to integrate more features from the UCITS key investor information document (KIID) into the PRIIPs KID, would make it even less suitable for IBIPs, and even more confusing for consumers. IBIPs represent around 80% of the current PRIIPs market, and the PRIIPs KID must therefore be fit for insurance products.
  • Proposed changes for multi-option products (MOPs) would be particularly burdensome for insurers to implement and not add any value for consumers. On the contrary, the introduction of additional layers of information, including cross-references, and complex costs tables for MOPs would confuse consumers and expose insurers to significant liability risks.
The full response to the consultation is available here.

Thursday, 9 January 2020

Munich Re:Tropical cyclones causing billions in losses dominate nat cat picture of 2019

  • Severe typhoons in Japan cause the year’s biggest losses
  • Hurricane Dorian, the strongest hurricane of the year, devastates the Bahamas – US mainland largely spared
  • Natural catastrophes cause overall losses of US$ 150bn, with insured losses of about US$ 52bn – In line with long-term average
  • Humanitarian tragedy caused by cyclones in Mozambique – Over 1,000 deaths – Better protection is urgently needed
  • The 2019 natural catastrophe year at a glance

    820 natural catastrophes caused overall losses of US$ 150bn, which is broadly in line with the inflation-adjusted average of the past 30 years. A smaller portion of losses was insured compared with 2018: about US$ 52bn. This was due, among other things, to the high share of flood losses, which are often not insured to the same extent as wind damage in most industrial countries.
    The insured portion of overall losses, slightly above 35%, matches the average of the past ten years. This is evidence that large sections of the market remain uninsured, especially in emerging and developing countries.
    Globally, in 2019, about 9,000 people lost their lives in natural catastrophes compared with 15,000 in 2018. This confirms the overall trend towards lower numbers of victims thanks to better prevention measures. On average over the past 30 years, about 52,000 people per year have lost their lives in natural catastrophes.
  • " The severe cyclones in 2019 have highlighted the importance of knowledge about changes in risk. Natural climate variations influence weather catastrophes from year to year. Longer-term climate change effects can already be felt and seen. Buildings and infrastructure must be made more resistant in order to reverse the increasing trend in losses. This will enable insurance to be more effective and support the remaining financial losses. 
    Torsten Jeworrek
    Member of the Board of Management

Wednesday, 18 December 2019

EIOPA publishes the results of the 2019 Occupational Pensions Stress Test

 The European Insurance and Occupational Pensions Authority (EIOPA) published the results of its 2019 Institutions for Occupational Retirement Provisions (IORPs) Stress Test. This is a crucial, biennial exercise to assess the resilience and potential vulnerabilities of the European Defined Benefit (DB) and Defined Contribution (DC) pension sector, tailored to the specificities of the diverse European pension sector and its potential impact on financial stability. For the first time, this European stress test exercise covered the analysis of Environmental, Social and Governance (ESG) factors for IORPs.
In its 2019 exercise, EIOPA applied an adverse market scenario, characterised by a sudden reassessment of risk premia and shocks to interest rates on short maturities, resulting in increased yields and widening of credit spreads. That adverse market scenario was applied to the end-2018 'baseline' balance sheet of a representative sample of European Economic Area (EEA) IORPs. In the baseline, those IORPs were underfunded by EUR 41 billion on aggregate, which translates into 4% of their liabilities, according to the common methodology.
The adverse market scenario would have led to substantial aggregate shortfalls of EUR 180 billion according to national methodologies and EUR 216 billion following the stress test's common methodology. Under the assumptions of the common methodology, the shortfalls in the adverse scenario would have triggered aggregate benefit reductions of EUR 173 billion and sponsoring undertakings would have to provide financial support of EUR 49 billion. In the 2019 exercise, EIOPA employed an extended cash flow analysis, which provided important insights into the stress effects in terms of timing: IORPs' financial situation would be heavily affected in the short term, leading to substantial strains on sponsoring undertakings within a few years after the shock and resulting in potential long-term effects on the retirement income of members and beneficiaries over decades (should the short-term effects become permanent).
Assessing the potential conjoint investment behaviours of IORPs after the stress event, EIOPA observed an expected tendency to re-balance to pre-stress investment allocations within 12 months after the shock. That may indicate counter-cyclical aspects of the expected investment behaviour, yet would also come at a risk.
The majority of IORPs in the sample indicated having taken appropriate steps to identify sustainability factors and ESG risks for their investment decisions, which is important for an effective implementation of the IORP II Directive, yet only 30% of them have processes in place to manage ESG risks. Further, only 19% of the IORPs in the sample assess the impact of ESG factors on investments' risk and returns. The preparedness of IORPs to integrate sustainability factors is widely dispersed and seems correlated to how advanced national frameworks were.
Matching the participating IORPs' investment information with Eurostat's greenhouse gas emission statistics by business sectors, indicates a relatively high carbon footprint, compared to the average EU economy, of the equity investments and, concentrated in a few Member States, of the debt investments.
In total, 19 countries participated in the exercise, covering more than 60% of the national DB and 50% of the national DC sectors in terms of assets – in most countries. In total 176 IORPs participated, thereof 99 DB IORPs and 77 DC IORPs.
EIOPA will follow-up on the findings and analyse in more depth the investment behaviour of IORPs, in particular in the persistently ultra-low and negative interest rate environment. To do so, EIOPA will make use of the significantly improved pension reporting from 2020. Going forward, EIOPA wants to further improve its analytical tool set for stress testing IORPs, extending the horizontal approach and with that assessing the common exposures and vulnerabilities of the DB and DC sectors together. 
Gabriel Bernardino, Chairman of EIOPA, said: 'Long-term obligations and long investment horizons arguably require IORPs to consider ESG factors and enable IORPs to sustain short-term volatility and market downturns for longer periods than other financial institutions.
The supervisory monitoring and the applied supervisory tools need to be capable of detecting adverse market trends and market developments that can have long-term negative effects.'
For more information, visit the dedicated webpage or read the factsheet.

Thursday, 12 December 2019

Insure yourself wisely: natural catastrophes

Insurance Europe has today published an infographic on steps people can take to limit their losses from natural catastrophes. While meteorological events such as storms, floods or drought are often unpredictable and outside of our control, things can be done to reduce the likelihood of loss.
Be prepared
Prevention is the best protection, so familiarise yourself with the possible risks in your area and what to do when an emergency arises.
Choose the right policy for you
Having an appropriate insurance policy will help you to cover potential damages as a result of a natural catastrophe.
Know your coverage
Be sure to read and understand the terms and conditions of your insurance policy, including what is covered and what possible exclusions there might be.
Making a claim
If you do suffer a loss as a result of a natural catastrophe, contact your insurer immediately for help and advice.
Insurers can provide expertise
Insurers not only provide insurance cover but can also help you to prepare and protect yourself against a natural catastrophe.
The infographic is part of Insurance Europe’s #InsureWisely campaign, which aims to increase financial literacy and awareness levels across Europe.
Financial education plays a vital role in ensuring that European citizens are equipped with the knowledge, confidence and skills necessary to improve their understanding of financial products and concepts. Insurance Europe also encourages EU policymakers and regulators to play a greater role in supporting this objective.

Tuesday, 10 December 2019

Why insurance is unique

Insurance is a unique financial service, without which many aspects of modern societies and economies simply could not function. And due to its special features, the insurance industry requires a tailored regulatory approach that reflects its business model.
new publication from Insurance Europe urges policymakers to make sure the industry’s special features are taken into account when developing insurance regulation.
“Why insurance is unique — and offers unique benefits for consumers” sets out four essentials:
  • The freedom to underwrite — Standardising policies or introducing compulsory schemes can have a negative effect on the cost and availability of policies. Insurers must be able to develop products that meet their customers’ expectations, fit their risk profiles and meet legal and fiscal national requirements.
  • Tailored prudential regulation — The regulatory framework needs to reflect the fact that insurers usually have stable, up-front and long-term funding and low exposure to liquidity risk and market volatility.
  • Regulation that reflects unique distribution and varying consumer needs — Insurance products are distributed completely differently to investment products. Regulation needs to reflect this or it could lead to fewer points of sale and less consumer choice.
  • Flexibility to present products and costs in a comprehensive way — The EU’s PRIIPs Regulation that governs disclosures for insurance-based investment products fails to capture the key features of insurance products and as a result misrepresent certain information that is important to retail investors.

Life Insurance Providers Global Market Report 2020

The life insurance providers market consists of sale of life insurance policies. Life insurance providers enter into a legal contract with the insurance policy holder, where the insurer (life insurance provider) promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person. The life insurance providers are primarily engaged in the pooling of risk by underwriting insurance (that is, assuming the risk and assigning premiums) and annuities.

The global life insurance providers market was valued at about $2951 billion in 2018 and is expected to grow to $3586.96 billion at a CAGR of 5.0% through 2022.

North America was the largest region in the life insurance providers market in 2018, followed by Asia Pacific.

The rise in disposable income in emerging countries such as India and China is expected to drive the life insurance providers market. Economic growth in the middle income group translates to higher disposable income which allows them to invest in life insurance products. According to report by Swiss Re Institute’s, world’s seven largest emerging markets will contribute 42% of global growth with China contributing 27%. This rising disposable income, especially in emerging countries is expected to increase demand for life insurance plans thereby driving the life insurance providers market.

Lack of awareness about life insurance and complex insurance products are acting as a restraint on the life insurance providers market. A large number of people tend to invest in traditional investment instruments as they are unaware about the benefits of life insurance. According to a survey conducted by PHD Research Bureau in 2016, around 49% of the population in India is not familiar with insurance products and around 57% of the people find insurance products too complicated and difficult to understand. This lack of awareness and information proves to be a restraint on the life insurance providers market.

Robotic process automation and artificial intelligence have transformed the way in which business is done in the insurance industry. Robotic process automation and artificial intelligence are being used in the life insurance industry to accurately predict outcomes, improve customer service, guide the development of new products, detect risks and cross-promote products. For example, Aditya Birla Sun Life Insurance has launched DISHA 2.0, an Upgraded AI-Enabled ChatBot in 2018 to navigate personalized solutions for life insurance choices. These technological developments will enhance the customer experience and will drive the market.

Life insurance companies are monitored by regulatory bodies such as the National Association of Insurance Commissioners (NAIC) in the USA, the Prudential Regulatory Authority (PRA) in the UK, and the China Insurance Regulatory Commission in China. For instance, the China Insurance Regulatory Commission (the “CIRC”), established on November 18, 1998, is authorized by the State Council to conduct administration, supervision and regulation of the Chinese insurance market, and to ensure that the insurance industry operates stably in compliance with law. CIRC is responsible for licensing, developing regulations on administration of reinsurance business and measures on administration of life and health insurance.

CVS Health, a pharmacy company has acquired a life insurance company Aetna in 2018 for a total transaction value of $78 billion. The agreement between both the companies include enhanced consumer and health insurance rate protections, privacy controls, cybersecurity compliance. The merger will include new programs and services designed to target better, more efficient management of chronic disease using the capabilities of the merged company such as technology, data, and analytics. Aetna begins offering participating life insurance policies, which paid dividends to policyholders. Aetna was famous for its aggressive promotional strategies and higher commission rate for agents.

Major players in the market are Munich Re, AXA, Generali, Allianz and China Life Insurance Company Limited.

For more information about this report visit

Thursday, 5 December 2019

EIOPA publicly consults on its approaches for regulating key aspects of the Pan-European Personal Pension Product (PEPP)

The European Insurance and Occupational Pensions Authority (EIOPA) launched the public consultation of its approach to the regulatory and implementing standards, and technical advice to the European Commission on delegated acts, as mandated by the Pan-European Personal Pension Product (PEPP) Regulation.
The Consultation Paper sets out EIOPA's current stances to approach the regulation of key aspects of the PEPP, underpinning the idea of establishing a simple, safe and cost-efficient savings product.
In developing its proposals, EIOPA sought input from the supervisory community of the insurance and pension sectors, the other European Supervisory Authorities, and conducted an active dialogue with EIOPA's stakeholder groups and the Expert Practitioner Panel on PEPP.
The resulting key considerations are:
  • PEPP information documents: pre-contractual and annual information on the PEPP and its investment options have to be highly standardised to allow for comparability between PEPPs and for the consumer to track the performance of the chosen PEPP. The information needs to be relevant and tailored to the pension objective of the PEPP. The proposals are built on the experience with packaged retail investment and insurance-based products (PRIIPs) and the Directive on the activities and supervision of institutions for occupational retirement provision (IORP II), yet tailored to the specificities of PEPP, in particular its long-term nature, whilst making the PEPP ready for digitalisation.
  • Cost cap of the Basic PEPP: the cost-efficiency of the Basic PEPP is enforced by the introduction of a cost cap. In line with the PEPP's policy objective, an 'all inclusive' approach is suggested, while ensuring a level playing field amongst providers offering different features and in particular a guarantee on the capital invested.
  • Risk-mitigation techniques: it is necessary to set out the principle objectives for the risk-mitigation techniques to foster investment strategies leading to better pension outcomes. Clear and auditable criteria are needed to ensure the effectiveness of the chosen risk-mitigation technique.
  • Supervisory Reporting and cooperation between NCAs and EIOPA: enabling an efficient functioning of the PEPP market requires close monitoring and effective product supervision both from a home and host perspective - which is only possible with regular information exchange on PEPP business.
  • EIOPA's product intervention powers: relevant criteria, tailored to the PEPP, have been developed, building on past experience with product intervention powers at the level of the ESAs.
Stakeholder feedback is necessary to further develop the proposals and to ensure that the regulation delivers on the promise of the PEPP as an effective tool to complement pension savings in Europe.
The consultation ends on 02 March 2020.
Gabriel Bernardino, Chairman of EIOPA, said: 'The current macro-economic environment with persistent low and negative yields requires the rethinking of long-term retirement savings solutions. The implementation of the PEPP Regulation is an opportunity to build an appropriate regulatory basis for the design and monitoring of innovative and cost‑effective products that could enable European savers to reap the benefits of sustainable growth.

EIOPA invites all stakeholders to contribute to this consultation in order to ensure that the PEPP will be a success for the benefit of European citizens.'