News

Insurance regulatory news, 5 July 2021

FIG Bulletin

05 July 2021

Reports on recent regulatory developments of interest to insurers and their intermediaries. See also our Financial institutions general regulatory news in the Related Materials links.

HM Treasury explains that respondents to its call for evidence were strongly supportive of the UK Solvency II regime. They consider that Solvency II has improved standards of risk management and reporting in the insurance sector, as well as the overall standard of prudential regulation. No respondents argued that Solvency II should be replaced by a different regime. Respondents stressed that the existing regime should be retained, not least because of the cost and disruption to replace it in full. Many believe the way the regime operates could be improved while retaining the current framework. However, some are against making reforms that may amount to divergence with the EU Solvency II regime.

HM Treasury concludes that the responses have confirmed the priorities for reform as set out in the call for evidence.

It has asked the Prudential Regulation Authority (PRA) to model different options in order to better understand which combination of reforms would best meet the government's objectives, and what the aggregate impact would be. To achieve this, the PRA will launch a quantitative impact study in summer 2021 and work with the government to analyse its results. HM Treasury states that this study will inform a comprehensive package of reforms for consultation in early 2022

HM Treasury notes that, should responsibility for making firm-facing requirements under Solvency II be delegated to the PRA under the Future Regulatory Framework Review, the government would set out the scope and core elements that the PRA must establish when amending the firm-facing elements of Solvency II in its Rulebook. The Government may also set out what the PRA must have regard to when establishing and maintaining this regime.

ICOBS premium finance disclosure rules: FCA delays commencement date

The Financial Conduct Authority (FCA) has updated the webpage on its policy statement on the general insurance (GI) pricing practices market study (PS21/5) to announce that it has made a small change to the new premium finance disclosure rules. The change is set out in Annex B to the FCA's Handbook Administration (No 56) Instrument 2021 (FCA 2021/25). The Instrument changes the commencement date for new rules in ICOBS 6A.5.2R and 6A.5.3R relating to premium finance disclosure (introduced by the FCA's Non-Investment Insurance: Product Governance, Premium Finance, General Insurance Auto-Renewal and Home and Motor Insurance Pricing Instrument 2021 (FCA 2021/19)) from 1 October 2021 to 1 January 2022.

EIOPA updates decision on collaboration of EEA insurance supervisory authorities

The European Insurance and Occupational Pensions Authority (EIOPA) has amended the Decision on the collaboration of the insurance supervisory authorities of the Member States in the European Economic Area. It states that the new Decision will further strengthen and enhance the cooperation between the national competent authorities (NCAs) in relation to cross-border activities through:

the introduction of three new notifications requirements for NCAs: (i) intention to authorise an undertaking with cross-border activities; (ii) where an undertaking carrying out cross-border activity shows deteriorating financial conditions or other emerging risks which may have cross-border effects; and (iii) where there are serious and reasoned concerns with regard to consumer protection;
a more active role of EIOPA in the information exchange to allow the identification of potential risks at the earliest possible stage as well as to foster proactive supervision and timely supervisory actions; and
the clarification of the role of NCAs and EIOPA in the process of setting up and running cooperation platforms.

EIOPA explains that the new Decision is key for achieving consistent supervisory practices to enhance preventive consumer protection across the EU. Increased cross-border activities in the internal market and the growing internationalisation of business activities require a sound exchange of information and a strong, close and timely collaboration between insurance supervisory authorities is needed.

The new Decision applied from 1 July 2021 onwards. EIOPA will continue to monitor the implementation of the Decision and will use its supervisory convergence tools to ensure a consistent application across the EU.

Benchmark transition: IAIS statement

The International Association of Insurance Supervisors (IAIS) has published a statement on benchmark transition. The IAIS endorses the Financial Stability Board's (FSB) statements and related reports regarding a smooth and timely transition away from LIBOR by the end of 2021. The IAIS encourages insurance supervisors to strengthen their efforts to facilitate insurers' transition.

Given the limited time available until end-2021, the IAIS urges insurers to act now to complete the steps set out the FSB's global transition roadmap.