Items addressed in the Dec 2018 CBI Insurance newsletter

The following is a summary of the items addressed in the December 2018 Central Bank of Ireland (CBI) Insurance newsletter:

1. 2019 Priorities

The CBI see the following as key priorities/areas of focus for this year:

  • Financial and operational resilience,
  • Industry response to disruptive changes,
  • Consumer protection; and
  • Culture and diversity – capital, investments and operational risk, how firms make decisions, how decisions are communicated, how they are reflected in risk management framework.

 2. Outsourcing services provided

The CBI issued a report in November 2018 on its review of outsourcing arrangements by regulated entities. Its review covered the use of inter-group entities and third party OSPs for the provision of activities and services considered to be central to the delivery of regulated firms’ strategic objectives. As a consequence of this review and its disappointing results, the CBI significantly increased its focus on outsourcing and the management by regulated firms of risks presented by outsourcing arrangements through specific, targeted onsite inspections and wider thematic reviews on outsourcing across the Irish financial sector.

The findings point to particular weaknesses in areas of:

  • Governance,
  • Risk management, and
  • Business continuity management.

Other concerns of the CBI include the increasing role of technology reflected in the rapid growth in the number of fintech and regtech firms and the use of the cloud service providers by regulated firms. The increasing use of the outsourcing of core IT activities has potentially raised the risks to the resilience of individual firms and the market in which these firm operate.  Increasingly regulated firms increase their risk appetite to facilitate the utilisation of outsourcing to meet business needs. Brexit may increase risks to outsourcing arrangements and its impact needs to be considered by regulated firms.

3. Underwriting opinions

As the requirement for the actuarial function to produce an opinion on underwriting is a relatively new the CBI completed a review of a sample of Underwriting Opinions and made the following observations:

  • The opinion should include all the material underwriting and pricing policies and processes. (some lacked detail on the actual processes and practices)
  • The opinion should be forward looking and take account of planned changes to the business (Planned changes and the related risks need to be considered and there will be changes due to Brexit)
  • The opinion should consider the links between underwriting and other aspects of the business. (The interrelationships between the underwriting policy, the reinsurance arrangements, and the technical provisions should be considered when providing an opinion.)
  • The opinion should be based on up to date data. (Data needs to be relevant and up to date).

4. SFCR reports

A consolidated view of SFCRs was published by the CBI on 18 December 2018. They have provided a set of tables covering all the 2017 reports comprising of the key metrics extracted from SFCRs.  The purpose of the publication is to increase transparency and make data more accessible.

5. With-profits funds

The CBI introduced new requirements for the Governance of With-Profits funds which introduces a With-Profits Operating Principles document, new annual reporting to members and new requirements for the Head of Actuarial Function in relation to With-Profits funds reporting to the CBI

https://www.centralbank.ie/docs/default-source/regulation/industry-market-sectors/insurance-reinsurance/solvency-ii/communications/insurance-quarterly-news/the-insurance-quarterly-december-2018.pdf?sfvrsn=6

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