Posts by: Kevin Wong

EIOPA Publishes Recommendations for Insurers in Event of No-Deal Brexit

Posted on

On February 19, EIOPA published recommendations (EIOPA-BoS-19/040) on providing guidance on the treatment of UK insurance undertakings and distributors with regard to cross-border services in the EU in the event of the UK leaving the EU without a deal.

The recommendations are addressed to NCAs and their general objective is to minimise the detriment to policyholders with cross-border insurance contracts. They are issued in accordance with Article 16 of the EIOPA Regulation (1094/2010), and are based on the Solvency II Directive (2009/138/EC), the Insurance Distribution Directive ((EU) 2016/97) (“IDD“), EIOPA guidelines and other relevant EIOPA instruments.

The recommendations relate to matters including the following:

  • Authorization of third-country branches. In accordance with Article 162 of Solvency II, UK insurance undertakings may seek authorization to carry out cross-border business through a branch in a member state.
  • Orderly run-off. NCAs should prevent that UK undertakings conclude new insurance contracts or establish, renew, extend, increase or resume insurance cover under the existing insurance contracts in their jurisdiction if they are not authorized for such insurance activities under EU law. This is without prejudice to policyholder rights to exercise an option or right in an existing insurance contract to realize their pension benefits.
  • Change in the habitual residence or establishment of the policyholder. If a policyholder with habitual residence or, in the case of a legal person, place of establishment in the UK, concluded a life insurance contract with a UK insurance undertaking and afterwards the policyholder changed its habitual residence of place of establishment to a EU27 member state, NCAs should consider in the supervisory review that the insurance contract was concluded in the UK.
  • Distribution activities. NCAs should ensure that UK intermediaries and entities that intend to continue or commence distribution activities to EU27 policyholders and for EU27 risks after the UK’s withdrawal, are established and registered in the EU27 in line with the relevant provisions of the IDD.
  • Portfolio transfer. If it was initiated before the withdrawal date, the NCAs should allow the finalization of portfolio transfer from UK insurance undertakings to EU27 insurance undertakings.

Competent authorities must inform EIOPA whether they comply or intend to comply with the recommendations within two months of the translated versions being issued. They will apply as of the date the UK leaves the EU.

ESMA Publishes 2019 Work Program for Credit Rating Agencies, Trade Repositories and Third-Country CCPs and CSDs

Posted on

 

On February 19, EMSA published its 2018 annual report and 2019 work program relating to its supervision of credit rating agencies (“CRAs“), trade repositories (“TRs“) and its monitoring of third-country central clearing counterparties (“TC-CCPs“) and central securities depositories (“TC-CSDs“) (ESMA80-199-273). READ MORE →

EIOPA Publishes Framework for Identifying Conduct Risks

Posted on

 

On February 20, the European Insurance and Occupational Pensions Authority (“EIOPA“) published a framework for assessing conduct risk through the lifecycle of an insurance product.

The purpose of the framework is to identify the drivers of conduct risk and the way in which these are detrimental to consumers. The aim is to help identify the issues faced by consumers and provide input on the types of risks EIOPA and national competent authorities (“NCAs“) should focus on. READ MORE →

EC Publishes Draft Delegated Regulations under MiFiD II and IDD on Sustainable Finance

Posted on

 

On January 4, the European Commission published the following draft Delegated Regulations which are designed to ensure insurance distributors and investment firms take environmental, social and governance (“ESG“) issues into account when advising customers:

  • a Delegated Regulation amending Delegated Regulation (EU) 2017/565 as regards to the integration of ESG considerations and preferences into investment advice and portfolio management under the MiFID II Directive (2014/65/EU); and
  • a Delegated Regulation amending Delegated Regulation (EU) 2017/2359 as regards to the integration of ESG considerations and preferences into investment advice for insurance-based investment products (“IBIPs“) under the Insurance Distribution Directive ((EU) 2016/97) (“IDD“).

The draft Delegated Regulations have been produced under Articles 24(13) and 25(8) of the MiFID II Directive, and Article 30(6) of the IDD, respectively. Publication follows a consultation run in May 2018. Although there was generally strong support to enhance the focus on non-financial objectives within the investment process, some stakeholders were reluctant to change their recently-implemented MiFID II or IDD processes. However, the Commission is convinced of the urgency of moving ahead with its sustainable finance proposals. The Commission also believes the proposed timeline for application of the draft Delegated Regulations provides sufficient flexibility as, although each explanatory memorandum states that the draft Delegated Regulations provide for an 18-month transition period, the draft legal texts themselves state that they will apply 12 months after they come into force.

The Commission can only officially adopt the draft Delegated Regulations once the new disclosure provisions for sustainable investments and sustainability risks have been agreed at the EU level. However, in a press release, it advised that publication of the drafts should enable firms to start preparing to take ESG considerations and preferences into account.

The Commission issued a call, in August 2018, for technical advice from EIOPA and ESMA relating to its sustainable finance proposals.

Once adopted by the Commission, the draft Delegated Regulations will enter into force twenty days after publication in the Official Journal of the EU (“OJ“), unless the European Parliament or the Council of the EU objects.

Council of the EU Publishes Notes on Proposed Regulation and Directive for Supervision Investment Firms

Posted on

 

On January 4, the Council of the EU published the following notes from the Council Presidency to its Permanent Representatives Committee (“COREPER“) relating to the European Commission’s proposed Regulation and Directive establishing a new framework for prudential requirements for investment firms:

  • A note (5022/19) setting out the Presidency compromise proposal on the proposed Directive on the prudential supervision of investment firms and amending the CRD IV Directive (2013/36/EU) and the MiFID II Directive (2014/65/EU) (2017/0364 (COD)) (the proposed Investment Firms Directive (“IFD“)).
  • A note (5021/19) setting out the Presidency compromise proposal on the proposed Regulation on the prudential requirements of investment firms and amending the Capital Requirements Regulation (Regulation 575/2013) (“CRR“), the Markets in Financial Instruments Regulation (Regulation 600/2014) (“MiFIR“) and the EBA Regulation (Regulation 1093/2010) (2017/0358 (COD)) (the proposed Investment Firms Regulation).

The previous compromise proposals were published in October 2018. The notes do not explain the changes that have been made in the latest revised versions. However, it appears that new text is marked in underlined bold and deletions are indicated in strikethrough.

Joint Committee of ESAs Publishes Report on Regulatory Sandboxes and Innovation Hubs

Posted on

 

On January 7, the Joint Committee of the European Supervisory Authorities (“ESAs“) (that is, the EBA, EIOPA and ESMA) published a report (JC 2018 74) on regulatory sandboxes and innovation hubs.

The ESAs set out in the report a comparative analysis of the innovation facilitators established to date within the EU, further to the mandate specified in the European Commission’s FinTech action plan, which was published in March 2018. READ MORE →

ECB Publishes Letter on Variable Remuneration Policies of Credit Institutions

Posted on

 

On January 10, the European Central Bank (“ECB“) published a letter (SSM/2019/010) (dated January 9, 2019) from Andrea Enria, ECB Supervisory Board Chair, on the variable remuneration policies of credit institutions in the single supervisory mechanism (“SSM“).

The letter states that the ECB pays close attention to the dividend and remuneration policies of the financial institutions under its supervision. In particular, the ECB will focus on any impact that these policies may have on the maintenance of a sound capital base. READ MORE →

ESMA Publishes First Annual Statistical Report on Retail Investment Products

Posted on

 

On January 10, ESMA published its first annual statistical report on the performance and costs of retail investment products in the EU (ESMA 50-165-731).

The report highlights, in particular, the significant impact of costs on the final returns that retail investors make on their investments. It covers undertakings for collective investments in transferable securities (“UCITS“), alternative investment funds sold to retail investors (“retail AIFs“) and structured retail products (“SRPs“).. READ MORE →