Thursday, 29 November 2018

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Timid 2018 Solvency II review has missed opportunity for progress on CMU


In response to the European Commission’s update yesterday on the progress of its Capital Markets Union (CMU) project, Olav Jones, deputy director general of Insurance Europe, commented:
“As the EU’s largest institutional investors, Europe’s insurers have always supported the aim of the European Commission’s Capital Markets Union (CMU) project to unlock capital around Europe. However, while some progress has undoubtedly been made, several points remain to be addressed.
“On the review of insurers’ Solvency II regulatory framework, we feel that the EC is really missing an opportunity to unlock capital that insurers could be using to boost Europe’s economy.”
One of the aims of the CMU is to address regulatory barriers to investment, including prudential issues under Solvency II that prevent more long-term investment by the insurance industry.
“Some welcome improvements have been made with respect to the treatment of STS securitisations and infrastructure, but more action is needed and possible,” said Jones. “Several important aspects — equity, the risk margin, the volatility adjustment and the loss absorbing capacity of deferred taxes (LAC DT) — are not being appropriately addressed in the 2018 Solvency II review.”
In its CMU progress report, the European Commission refers to adjustments it has proposed to insurers’ investment in equity. Unfortunately, the draft EC proposal currently being consulted on as part of the Solvency II Delegated Acts in this area would not achieve its aim of unlocking investment, as the way it is designed makes it unlikely any insurer would qualify for the calibration.
The insurance industry strongly believes that this lack of effective action by the Commission is a missed opportunity. The unnecessarily high capital requirements for insurers’ long-term equity need to be reviewed to reflect the true long-term risk exposure of this asset class.

Tuesday, 20 November 2018

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AMICE calls for a fair and competitive marketplace in Europe



The Association of Mutual Insurers and Insurance Cooperatives in Europe aisbl (AMICE), the voice of the mutual and cooperative insurance sector in Europe, has today highlighted the barriers to cross-border insurance for its members,
Despite forming more than 30% of the European insurance market, there are significant barriers for many mutual and cooperative insurers to actively participate in cross-border insurance activities. With cross-border business being highlighted at EIOPA’s annual conference today in Frankfurt, as well as in the recent report on some of EIOPA’s activities by the European Court of Auditors, AMICE continues to call for all European countries to recognise the mutual model and ensure a balanced approach to supervision and proportionality to maintain diversity in the market and choice for policymakers.
Information contained in AMICE’s recently published Facts & Figures Vol 2 shows the disparity in legislative and regulatory systems in the EU28 and EEA countries, as well as the development of the sector in Europe in the years 2007-2015. Facts & Figures Vol 2 is the biggest longitudinal study of the sector every undertaken.
Sarah Goddard, AMICE Secretary General commented,
She continued,
“Although the European insurance industry in general continues to feel the pressures of a testing business environment, the durability of the mutual and cooperative insurance model has provided a buffer against some of the problems traditionally faced by policyholders when there is a sustained period of challenge. This was clearly illustrated our second edition of the Facts & Figures publication, which showed a substantial increase in market share for our sector in the years of turmoil following the global financial crash a decade ago.”
The full report is available from the AMICE Secretariat or via the AMICE website

Statistical data was sourced and analysed for this report by the International Cooperative and Mutual Insurance Federation (ICMIF). The legal landscape elements of the report were developed through desk research by AMICE, supported by AMICE members, national supervisors, national associations and other trade bodies.

Friday, 16 November 2018

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EIOPA assesses supervisory practices and application of key functions through peer review




  • This peer review assessed how National Competent Authorities (NCAs) supervise and determine the application of the key functions by the insurer with particular emphasis on proportionality
  • In general NCAs apply the principle of proportionality
  • Some weaknesses exist, leading to recommended actions to 18 NCAs in 8 different areas of supervisory approaches
  • For the first time, the findings are published on a named basis
European Insurance and Occupational Pensions Authority (EIOPA) published the findings of its  peer review assessing how National Competent Authorities (NCAs) supervise and determine whether an insurer's set­ting of key functions fulfils the legal requirements of Solvency II with a particular emphasis on proportionality.
The review examines practices regarding:
  • combining key functions under one holder;
  • combining key functions with administrative, management or supervisory body (AMSB) member­ship or with carrying out operational tasks;
  • subordination of one key function under another key function;
  • split of one key function among several holders;
  • assessment of the fitness of key function holders; and
  • outsourcing of key functions.
Key functions (risk management, actuarial, compliance and internal audit) are an essential part of a good system of governance under Solvency II, and, are expected to be operationally independent to ensure effective internal control. Given that the implementation of the governance requirements should reflect the natural scale of complexity of the risks run by the insurers, NCAs should apply the principle of proportionality in relation to the compliance with key function holder requirements.
The report includes findings from a comparative analysis of the key functions, identifies best practices and presents an overview of recommended actions addressed to the NCAs and EIOPA.
Overall, NCAs have adopted similar approaches in assessing how insurers manage key functions and applied the principle of proportionality in their assessment. Four best practices have been identified, providing guidance to NCAs for a more systematic approach regarding the principle of proportionality as well as for ensuring consistent and effective supervisory approaches.
The report also identifies some weaknesses, resulting in a number of recommended actions issued to NCAs. Some NCAs had not yet assessed key functions according to the Solvency II requirements. Other NCAs had weaknesses, in particular regarding the depth assessment and mitigating measures demanded from insurers for example in cases where combinations exist. The areas of recommended actions are linked with the supervisory approach of NCAs, the different combinations of key function holders including the internal audit function and AMSB membership as well as the fitness of the key function holders and outsourcing. 
In line with the recently updated methodology, for the first time, the peer review findings are published in full and on a named basis.
As a result of this peer review, many NCAs have already undertaken actions to improve supervisory practices. These improvements will be taken into consideration in the follow-up to this review.
Gabriel Bernardino, Chairman of EIOPA, said: "The results of this peer review demonstrate the effective approach of national competent authorities in applying the principle of proportionality in their assessment of key functions. Through the implementation of the recommended actions consistent approaches among supervisory authorities will be further enhanced. I particularly welcome the increased transparency through the publication of the findings on a named basis. In being open about their activities, including where improvements can be made, the supervisory community is strengthening the foundations of supervisory convergence."
A shorter Executive Summary, the full report and the methodology applied in the conduct of the peer review can be obtained via EIOPA's Website.

Thursday, 15 November 2018

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Joint Statement: EU and U.S. insurance regulators continue the dialogue on cyber security, cyber insurance, the use of big data and intra-group transactions






  • Growing cyber threats, increasing power of big data as well as contagion risk from intra-group transactions in multi-national insurance groups are focus areas for risk-based and forward-looking supervision in the United States and the European Union
  • The Steering Committee of the EU -U.S. Insurance Dialogue Project set the scene for 2019 for further deepening the cooperation and mutual understanding of regulatory approaches and supervisory practices in these evolving and critical areas
  • The recent EU -U.S. Forum served as an important platform to share multiple perspectives on objectives, opportunities, challenges and risks in these key areas. 
Frankfurt, 14 November 2018 – On 10 November 2018, the European Insurance and Occupational Pensions Authority (EIOPA) together with the National Association of Insurance Commissioners (NAIC) and the Federal Insurance Office (FIO) of the U.S. Department of Treasury hosted the sixth EU- U.S. Forum in Luxembourg. Representatives from the industry, consumer organisations and regulators from the United States and the European Union discussed challenges and opportunities related to cyber risks, the use of big data, artificial intelligence and intra-group transactions in multi-national insurance groups.
Gabriel Bernardino, Chairman of EIOPA, said: "We particularly welcome cooperation with our American colleagues, building on successful past dialogue and now benefiting from deepening the mutual understanding of supervisory approaches and practices to address fast evolving cyber risks, increasing power of big data and the critical area of intra-group transactions. Considering the implications for the operational environment and the business models of insurers, globally, a collective response of supervisors is required to meet our primary objective which is the protection of policyholders and beneficiaries."
Katharine L. Wade, Commissioner, Connecticut Insurance Department, said: "The EU- U.S. Insurance Dialogue Project has led to an enhanced mutual understanding of our respective regulatory frameworks and initiatives in the areas of cyber security, cyber insurance, use of big data and intra-group transactions. Continued dialogue with our European colleagues in these key areas helps to ensure effective coordinated supervision of cross border insurance groups for the benefit of our policyholders."

Tuesday, 13 November 2018

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ESAs consult on proposed changes to the key information document for PRIIPs



The European Supervisory Authorities (ESAs) have today issued a consultation paper on targeted amendments to the Delegated Regulation covering the rules for the Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs).

The ESAs, on 1 October 2018, set out in a letter to the European Commission their intention to make proposals to support legislative changes to avoid the possibility of duplicating information requirements for investment funds from 1 January 2020, and to tackle key issues that have arisen since the implementation of the KID. The consultation paper addresses, in particular, amendments to the information regarding investment products' performance scenarios.

The proposals are made in the context of the ongoing discussions between the European co-legislators on the application of the KID by certain investment funds as well as the timing of a wider and more comprehensive review of PRIIPs, which was due this year. The outcome of this targeted review is without prejudice to that wider review, and it would be beneficial to conduct such a wider review early in the next term of the European Parliament. 

In addition, when deciding upon the nature of their final recommendations following this consultation in January 2019, the ESAs will take into account the feedback from respondents to this consultation and the latest information of these political discussions on the application of the KID by certain investment funds and the timing of the wider review.

The deadline for submission of feedback is by Thursday, 6 December 2018.

Wednesday, 7 November 2018

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G20 engagement and much more in GFIA’s latest Annual Report



The Global Federation of Insurance Associations (GFIA) has today published its Annual Report for 2017-18, which provides an overview of the federation’s activities over the past 12 months, along with positions and opinion pieces on the issues facing insurers worldwide.
Outlining GFIA’s role as the voice of the global insurance industry, the Report details GFIA’s activities in support of the Argentinian G20 presidency and its goals, particularly in relation to infrastructure investment. The report also gives an overview of the work conducted by GFIA’s various working groups.
During the last 12 months, GFIA has provided input to consultations by a number of international bodies, including the Financial Stability Board, the International Association of Insurance Supervisors and the Financial Action Task Force. In addition, it has published observations on disruptive technology, cybersecurity and policy recommendations for tackling the challenges posed by ageing populations.
Recaredo Arias, vice president of GFIA, commented: “It is with great pleasure that I reflect on just how much we have achieved together in the six short years since GFIA was founded. Most importantly, I take pleasure in being able to look ahead knowing that GFIA is firmly established at the highest level on the world stage and that its raison d’être is clear and its future is secure.”

Monday, 5 November 2018

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More work needed to make global Insurance Capital Standard ready for testing

Insurance Europe has published its response to an International Association of Insurance Supervisors (IAIS) consultation on the development of the Insurance Capital Standard (ICS) 2.0.
Significant improvements are still required for the ICS version 2.0 to properly reflect insurers’ business models, and for it to correctly identify and measure the risks that insurers face.
While Insurance Europe welcomed several improvements made to the ICS since the beginning of its development four years ago, it said further significant refinements are needed.

Given that the IAIS wishes to have the framework ready to begin the next stage — which is confidential reporting by insurers — by the end of 2019, those improvements are required even more urgently to ensure the results of the confidential reporting are meaningful.

In fact, the more progress that can be made now, the more likely it is that the adoption of an implementable version of the ICS will be achievable. Continuous dialogue and exchanges with the industry in the coming months will be key to allow these improvements to be discussed thoroughly, so that decisions are well-informed and flaws are minimised.

Wednesday, 31 October 2018

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First 2017 European insurance stats published



Insurance Europe has published “European Insurance — Key Facts”, which contains provisional 2017 data for the European insurance industry. European insurers generate premium income of more than €1 200bn, directly employ over 950 000 people and invest over €10 100bn in the economy.
The booklet provides data on premiums and claims by business line and on insurers’ investment portfolio. It also includes figures for insurance penetration, average insurance premiums per capita and claims per capita, at both European and national level.
The booklet is available here.
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Insure yourself wisely: motor insurance



Insurance Europe has published an infographic today to help consumers ensure that they have appropriate motor insurance cover, drive safely in an increasingly connected world and know what to do in the event of an accident.
Consumers are, for example, encouraged to do a little research to find the motor insurance policy that best suits their needs. Insurance Europe also recommends that consumers do not just focus on the price of the policy, but also pay attention to exactly what it covers.
As driving across borders is an everyday reality in Europe and accidents between vehicles from different countries are common, Insurance Europe also published a step-by-step guide today on what consumers should do if they are involved in a road accident while travelling abroad.
The motor insurance infographic and the guide to the claims process for accidents abroad are 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, 30 October 2018

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EIOPA: Review of illiquid liabilities and analysis of potential implications: Request for feedback launched


One of the most debated issues before the Solvency II implementation and still nowadays is the treatment of long-term insurance business. In addition to the LTG Review, EIOPA also embarked in work to further explore evidence on the features of liabilities, especially concerning their illiquidity characteristics. Therefore, a dedicated EIOPA Project Group on Illiquid Liabilities was set up. The illiquidity characteristics of liabilities may contribute to the ability of insurers to mitigate short-term volatility by holding assets throughout the duration of the commitments, even in times of market stress.

A Request for Feedback on Illiquid Liabilities is being launched today, on Monday 29 October 2018 and open until Friday 7 December 2018.  With this, EIOPA asks stakeholders for feedback on the envisaged approaches to assess the illiquidity characteristics of insurance liabilities, the actual holding periods of assets of insurers  as well as the risks of holding assets over a longer term.

Such analysis will contribute to EIOPA's further assessment whether the risks connected to illiquid liabilities and the assets covering long-term liabilities are adequately reflected in the current regulatory regime.