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Insurance regulatory news, 8 February 2021

FIG Bulletin

08 February 2021

Recent regulatory developments of interest to insurers and their intermediaries. Reports on a UK PRA letter to life insurers on application of effective value test, Solvency II updates and more. See also our General regulatory news in the Related Materials links.

In the letter, the PRA explains that its Supervisory statement, SS3/17 "Solvency II: illiquid unrated assets", sets out a diagnostic test, the EVT, to assesses the appropriateness of the matching adjustment (MA) benefit life insurers derive from restructured equity release mortgages (ERMs). Following its review of the submissions from life insurers reporting the results of the EVT at year-end 2019, and the models and data provided in response to a data request of 27 February 2020, the PRA is giving feedback to firms in this letter. To promote the clarity and consistency of submissions, the PRA asks firms to consider key points set out in the letter when conducting the EVT. The key points cover:

structure of economic value;
use of appropriate assumptions; and
presentation and submission of results.

The PRA expects life insurers to incorporate the recommendations around best practice set out in its letter into their EVT models at the "nearest convenience" and, at the latest, by 31 December 2021, when the full expectations of SS3/17 will come into effect.

EU Solvency II 2020 review: European Commission summary report of consultation

The European Commission has published a summary report of its public consultation on the review of prudential rules for insurance and reinsurance companies ( Solvency II). In the report, the Commission summarises the feedback received to its consultation.

The Commission explains that it will consider the feedback, alongside the European Insurance and Occupational Pension Authority's (EIOPA's) work on the review, when it is shaping the legislative proposal it plans to adopt in the third quarter of 2021.

Solvency II: EIOPA 2019 report on use of capital add-ons by NCAs

EIOPA has published its annual report on the use by national competent authorities (NCAs) of capital add-ons (CAOs) under the Solvency II Directive. The analysis in the report addresses the CAOs set during 2019 to solo undertakings or insurance groups from the 30 EEA countries (or members) and from the UK.

EIOPA supervision: speech on 10-year anniversary

EIOPA has published a speech by Gabriel Bernardino, outgoing EIOPA Chair, delivered at EIOPA's 10th anniversary conference. In his speech, Mr Bernardino considers EIOPA's achievements since its establishment in 2011 and outlines three structural reforms he considers necessary for the next decade under the following headings:

the urgency to deliver adequate and sustainable pensions to EU citizens;
a new approach to consumer disclosures; and
the need for centralised insurance supervision.

Open insurance: EIOPA discussion paper

EIOPA has published for consultation a discussion paper on open insurance, which focuses on access to and sharing of insurance-related data. In the paper, EIOPA explores questions on whether and how far insurance value chains should be "opened" up by the sharing of insurance-related and specific policyholder data amongst insurance and non-insurance firms, to protect policyholder rights and to allow for innovation in products and services. The main areas of the consultation paper include:

open insurance definition and use cases;
risks and benefits of open insurance;
regulatory barriers; and
possible areas to consider for a sound open insurance framework.

The consultation closes on 28 April 2021.

EIOPA will assess the feedback to this discussion paper to better understand open insurance developments and risks and benefits related to that. It states that this could also help to provide informed insurance supervisory specific input for the upcoming legislative initiatives foreseen in the European Commission Data Strategy and Digital Finance Strategy. In addition, it could supplement EIOPA's ongoing work on areas such as (re)insurance value chain and new business models arising from digitalisation, insurance platforms and ecosystems, digital ethics, RegTech/SupTech and blockchain. EIOPA will work further on this together with national competent authorities (NCAs) on supervisory responses to further support supervisors and supervisory convergence while maintaining a strong and open dialogue with all the stakeholders.