EIOPA

European Commission Requests the EIOPA Advise on PEPP Regulation Delegated Acts

Posted on

 

On August 5, the Council of the EU published a cover note, which attaches a call for advice from the European Commission to the European Insurance and Occupational Pensions Authority (EIOPA) (dated July 31) on possible delegated acts concerning the Regulation on a Pan-European Personal Pension Product (PEPP Regulation) ((EU) 2019/1238).

The Commission requests advice relating to:

  • The criteria and factors to determine when there is a significant PEPP saver protection concern under Article 64(9).
  • The specification of additional information for supervisory reporting under Article 40(9) of the PEPP Regulation.

The PEPP Regulation was published in the Official Journal of the EU on July 25.

The Commission requests the final version of the advice by August 14, 2020.

EIOPA Publishes Report on Thematic Review on Big Data Analytics

Posted on

 

On May 8, the European Insurance and Occupational Pensions Authority (EIOPA) published a report setting out the findings of its EU-wide thematic review on the use of Big Data Analytics (BDA) in motor and health insurance. The aim of the review was to gather empirical evidence on the benefits and risks arising from BDA, including artificial intelligence, machine learning and cloud computing services.

The report found that there was a strong tendency towards increasingly data-driven business models throughout the insurance value train and that a majority of firms were either using, or contemplating using, BDA tools.

The report notes that there are still risks to be addressed, including ethical issues around the fairness of the use of BDA, as well as regarding the accuracy, transparency and auditability of BDA tools. It highlighted the biases inherent in data that being used could be reinforced through machine learning algorithms if firms do not have adequate governance arrangements in place. The EIOPA is going to undertake further work throughout 2019 in relation to these identified risks.

The report also sets out details of future BDA initiatives, including: the supervision of artificial intelligence and machine learning, ethics and fairness, outsourcing of cloud computing services by insurers and cyber insurance and cyber security.

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.

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 →

EIOPA Publishes Results of Peer Review Under Solvency II

Posted on

 

On January 25, the European Insurance and Occupational Pensions Authority (“EIOPA“) published the results of its peer review that examined how national competent authorities (“NCAs“) evaluated the propriety of administrative, management or supervisory body (“AMSB“) members and qualifying shareholders between January 2016 and May 2017.

Important areas of risk include:

  • A number of regulatory frameworks are not aligned with the Solvency II framework and NCAs are applying different standards and scope while assessing propriety.
  • Very few NCAs perform continuing assessment of the propriety of qualifying shareholders and AMSB members. Continuing assessment should involve proactive, risk-based and proportionate engagement resulting from the NCAs’ own initiative, as part of its supervisory activities.
  • Some NCAs do not make their supervisory expectations and standards known internally to supervisory staff and externally to insurers.

Insurers are required to be owned and run by persons of integrity and of good repute to ensure sound and proper management under the Solvency II Directive (2009/138/EC).

The results published by EIOPA can be found here.

EIOPA Publishes Call for Evidence on Integration of Sustainability Risks in Solvency II

Posted on

 

On January 17, the European Insurance and Occupational Pensions Authority (“EIOPA“) published a call for evidence on the integration of sustainability risks and factors in the prudential assessment of assets and liabilities for insurers and (re)insurers under the Solvency II Directive (2009/138/EC). The Commission’s initiatives on sustainable finance form part of its broader initiative to establish the capital markets union (“CMU“).

The deadline for responses to the call for evidence is March 8, 2019. EIOPA plans to prepare a draft opinion for consultation during the second half of 2019 for submission to the European Commission in the third quarter of 2019.

The call for evidence relates to the European Commission’s call for advice from EIOPA and ESMA in July 2018, following which EIOPA launched a survey to help it build up a suitable evidence base on the sustainable finance legislative proposals.

EIOPA expects to collect market data to analyze how sustainability risks affect (re)insurers investments, with particular focus on climate change, as well as data on market practices on insurance underwriting. The Commission has asked EIOPA to assess whether Solvency II presents any inherent incentives or disincentives to sustainable investment, including but not limited to investments in unrated bonds and loans, unlisted equity and real estate. National competent authorities will collect information from individual undertakings within their jurisdiction to support EIOPA’s analysis.

EC Seeks Guidance on Sustainable Finance

Posted on

 

The European Commission (“EC“) published an open letter to EIOPA and ESMA on August 1, 2018. The letter sought technical advice in relation to sustainable finance, in particular technical advice relating to legislation.

The letter, the full version of which is available here, outlines that the European Commission adopted a package of measures on sustainable finance on May 24, 2018, however they are seeking advice in relation to the possible amendment of legislation such as UCITS, MiFID II and Solvency II.

The aim of the letter, and the possible changes proposed therein, is to incorporate sustainability risks in the decisions taken and processes applied by financial market participants.

The letter asks that EIOPA and ESMA provide their insight by April 30, 2019.

EIOPA Launch Big Data Review of the Motor and Health Insurance Markets

Posted on

 

The European Insurance and Occupational Pensions Authority (“EIOPA“) has published a press release on July 6, 2018 announcing the launch of an EU wide review on the use of Big Data. The focus of the review is on the motor and health insurance markets.

The review is intended to gather empirical evidence on the use of Big Data by insurance undertakings and intermediaries along the whole insurance value chain (including pricing and underwriting, in product development, in claims management, as well as in sales and marketing).

The review will analyze the potential benefits and risks for both industry and consumers to determine what (if any) supervisory and regulatory actions are required. It will assess new business models and data quality issues arising from Big Data, including implications for consumers.

EIOPA will conduct the review in co-operation with national competent authorities (“NCAs“) with a view to covering at least 60% of the motor and health insurance markets in each member state. The data is intended to be collected during July and August 2018. The following quantitative and qualitative questionnaires have been sent to NCAs, consumer associations and representative sample of insurance undertakings:

EIOPA intends to publish the review’s key findings in the first quarter of 2019.

The review follows the cross-sectoral review of the use of Big Data by financial institutions published by the Joint Committee of the European Supervisory Authorities (“ESAs“) in March 2018.

EIOPA Final Report on First Set of Technical Advice on Solvency II Delegated Regulation

Posted on

On October 31, 2017, EIOPA published a document containing the first set of advice to the European Commission on specific items in the Solvency II Delegated Regulation ((EU) 2015/35) (EIOPAA-BoS-17/280).

The advice covers the following areas:

  • Simplified calculations of capital requirements in the Solvency Capital Requirement (“SCR“) standard formula.
  • Reducing reliance on external credit ratings in the calculation of the SCR.
  • Exposures guaranteed and exposures to regional governments and local authorities (“RGLA“).
  • Risk-mitigation techniques.
  • Undertaking specific parameters.
  • Look-through for investment related undertakings.
  • Loss-absorbing capacity of deferred taxes (“LAC DT“). The advice contains factual information only; this issue will be addressed further in EIOPA’s second set of advice to the Commission.

EIOPA published a consultation paper on the advice in July 2017 (EIOPA-CP-17/004), which followed on from a discussion paper published in December 2016 (EIOPA-CP-16/008). EIOPA has also published a final report that contains details of the feedback that it received on EIOPA-CP-16/008 and EIOPA-CP-17/004, as well as the final text of the advice and a summary of comments received to EIOPA-CP-17/004.

EIOPA is providing its advice in two sets. It will send the second set of advice to the Commission by the end of February 2018. EIOPA issued a call for evidence relating to this second tranche of advice in April 2017. This will address issues such as policy proposals on LAC DT to increase supervisory convergence, risk margin, catastrophe risks, non-life and life underwriting risks, non-proportional reinsurance covers, unrated debt and unlisted equity and own funds. EIOPA plans to consult on these issues before the end of 2017.