Regulatory Update

The following is a summary of the items addressed in the April 2019 Central Bank of Ireland (CBI) Insurance newsletter.

Solvency II review

Certain areas of Solvency II are due to be reviewed by the EU Commission before the end of 2020. EIOPA has been given until 30 June 2020 to give its advice to the Commission. The areas under review are:

  • Long Term Guarantee Measures
  • Methods, assumptions and standard parameters for calculating Solvency Capital Requirement (SCR) in the standard formula
  • Group supervision and capital management within a (re)insurance group
  • NSA practices for calculating Minimum Capital Requirement (MCR)
  • Best Estimate
  • Reporting and Disclosure
  • Risk Mitigation Techniques
  • Macro Prudential Issues
  • Recovery and Resolution
  • Insurance Guarantee Schemes
  • Freedom of Services and Freedom of Establishment

Risk Management of Derivatives – note that the CBI Guidance on “Risk Management of Derivatives” has been removed from the CBI website as it no longer applies to Solvency II firms.

Actuarial Reporting – the Actuarial Opinion on Technical Provisions (AOTP) and the Actuarial Report on Technical Provisions (ARTP) must be submitted using the CBI’s Online Reporting System (ONR).

Q&A on Templates for Information – refer to EIOPA Q&A document  on the new templates for the submission of information published on 18 March 2019.

Fintech - refer to EIOPA’s Report EIOPA "Outsourcing to the Cloud" published on 27 March 2019 which was in response to the European Commission’s request to explore the need for guidelines on outsourcing to cloud service providers.

Long-term non-life cross-border business – refer to EIOPA Opinion for an Opinion on non-life cross-border insurance business and its supervision published by EIOPA on 21 December 2018. The purpose of this opinion is to ensure consistent supervisory practices and the appropriate application of the legal requirements in relation to the calculation of technical provisions and quantitative information on business with local specificities or distinctive features.

SCR – The following proposed changes to the Solvency II Delegated Acts are currently subject to scrutiny by European Council and Parliament:

  • Loss Absorbing Capacity of Deferred Taxes (LACDT) – new principles have been included to promote convergence in the calculation. Proposed implementation date is 1 January 2020.
  • Classification of Own Funds – further alignment of exposures to counter parties and governments and classification of Own Funds items with banking regulation.
  • Reductions to the stresses for unrated debt and unlisted equity invesetments and a new provision included to reduce the stress for long term equities to 22%, once they meet certain criteria.
  • Simplifications for a number of life and non-life insurance risk modules.
  • Re-calibration of parameters for non-life premium and reserve risk and health and life catastrophe risk.

Environment and climate change

The environment has become an important concern due to the impact of human activity on the consequences of global warming. Financial institutions must consider their responsibilities and their impact on the surrounding environment and on humanity. Financial institutions have a clear responsibility towards the environment in which they are carrying out their business. Non-life insurers already have an interest in climate change as it impacts their liabilities and pricing of risk.  Natural catastrophes can have a cross-border impact, hence an EU wide response is required.

CBI April 2019 Insurance Quarterly Newsletter

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