Today, insurance companies aren't just competing with traditional insurers - they are competing with everyone. As customers embrace the omni-channel and personalized experiences being offered by the likes of Apple, Amazon, Google, and a myriad of digital start-ups, they are beginning to demand those same experiences from everyone they do business with. Our article explores this shift, which is putting significant pressure on insurance companies to think differently about what they do and how they do it.
It is worth noting that the Finance Bill 2018 has now passed through the Dáil and Seanad and is due to be signed before the end of the year (usually on 25 December). Further details are included here.
The focus from an Irish tax perspective will now be on interest restrictions, transfer pricing and a territorial tax system and we expect consultation papers to be issued on each of these in 2019 by the Department of Finance. We will provide an update on these throughout 2019.
The Central Bank’s publication ‘Discussion Paper 8 - Outsourcing Findings and Issues for Discussion’ issued on the 19 November 2018, follows on from an extensive review of outsourcing arrangements across the Irish financial sector in which 185 regulated firms were surveyed.
The review identified significant weaknesses in how outsourcing arrangements are being managed, with the results of the survey being described as “disappointing”.
The CBI hosted a Solvency II reporting workshop (PDF, 2.6MB) on 12 November. The workshop covered key issues observed by the CBI when reviewing the 2017 year end quantitative reporting templates (QRTs), with a focus on the reinsurance templates. The workshop covered also the findings from the CBI’s thematic inspections on regulatory reporting and the Dear CEO Letter which set out good practices observed during the inspections. Additionally, the CBI provided feedback to insurers on their Regular Supervisory Reports (RSR) and SFCRs.
The CBI published the results of its research into consumer understanding of the identity and location of their motor insurer, (PDF, 1.3MB) including where motor insurance cover may have been purchased through an insurance broker acting on behalf of a Managing General Agent (MGA).
This work (PDF, 1.3MB) was carried out to support and inform the work of the thematic inspection of retail intermediaries acting as MGAs. The CBI found that a significant portion of consumers do not know the identity of their insurer.
The CBI published a Dear CEO Industry Letter (PDF, 417KB) setting out key consumer protection risks it identified during its thematic inspection on the sale of gadget insurance. One of the areas the CBI assessed was the training and information provided by insurers to brokers distributing gadget insurance products, as well as how insurers maintain oversight of the brokers.
The CBI required the inspected insurers to review and update their sales and marketing material; as well as their procedures and controls relating to claims handling, complaints handling and oversight of outsourced activities.
The CBI made available on its website a statement by the Danish Financial Services Authority, setting out the supervisory actions (PDF, 264KB) taken after Quodos Insurance A/S decided to enter into liquidation following a breach of its MCR. On 3 December 2018, Qudos Insurance A/S was directed to increase the overall gross claims provisions, write down the value of certain assets (unlisted shares, receivables and deferred tax assets), increase other provisions, and recalculate both its own funds and SCR.
European insurance and reinsurance undertakings are required to make publicly available, and submit to their regulators, a report on their solvency and financial condition (SFCR). The 2017 SFCR of most Irish insurance and reinsurance undertakings were submitted to the CBI in May.
The CBI has now made available on its website the 2017 SFCR of all Irish insurers and reinsurers.
On the 15 November 2018, EIOPA published the findings of its peer review assessing how National Competent Authorities (NCAs) supervise and determine whether an insurer's setting of key functions fulfils the legal requirements of Solvency II with a particular emphasis on proportionality.
The review examines practices regarding
EIOPA published its Annual European Insurance Overview in November. The 2018 Insurance Overview is based on Solvency II information submitted by insurance and reinsurance undertakings across the EEA in relation to their financial year ended 2017.
The Overview looks separately at life and non-life gross written premium (GWP); lines of business split per country based on GWP; combined ratios, claims ratios and expense ratios per country and per line of business, etc
On 20 November EIOPA held its 8th Annual Conference in Frankfurt. EIOPA Chairman Gabriel Bernardino’s keynote speech focused on the need to maintain consumer confidence in insurance and pensions given that both depend on long-term investments and trust.
EIOPA’s Chairman urged regulators and providers to take into account the impact of climate change and the importance of sustainability in their future business decisions. EIOPA published its Chairman’s keynote speech (PDF, 668KB). The final keynote speech by Jens Weidmann, President of the Bundesbank, is available here.
In December, EIOPA issued a call for experts in modelling and/or underwriting of natural catastrophe and climate change risks to join a Technical Expert Network on Catastrophe Risk.
According to a new report from the European Court of Auditors, the European Insurance and Occupational Pensions Authority (EIOPA) has made an important contribution to a common supervisory culture and financial stability in the insurance sector.
EIOPA, as one of the three European Supervisory Authorities (ESAs), has the mission of supporting the stability of the financial system and protecting consumers in the fields of insurance and occupational pensions. The insurance market with assets worth around two-thirds of the EU GDP is a significant part of the financial market in Europe. Its failure could negatively affect the real economy and consumers’ well-being. The European Court of Auditors examined whether EIOPA made an effective contribution to supervision, supervisory convergence and financial stability. For the latter it focused on the 2016 insurance stress test.
The conclusion from the report that EIOPA has made good use of a wide range of tools, although their design and follow-up should be improved. A number of systematic challenges were found with regard to supervision of cross-border businesses and internal models. They need to be addressed by EIOPA itself, by national supervisors and by legislators, particularly in the context of the ongoing ESAs’ review.
The following updates, while UK specific, may be of interest to Irish based (re)insurers:
15 November: Securitisation: General requirements and capital framework
The PRA published a supervisory statement on securitisation of Solvency II firms following the CP12/18 (PDF, 787KB) released in May 2018. The new securitisation legislative framework effective from 1 January 2019, recognises insurance firms, reinsurance firms or ISPVs as potential originators and/or institutional investors.
8 November: ‘’Market conditions facing specialist general insurers: Feedback from recent PRA review work’’ Update – letter from Anna Sweeney
The PRA has provided an update to the Dear CEO letter (PDF, 392KB) published in May 2018. Market responses confirmed the risks identified in the publication and the PRA is planning further review in some cases. In the event that a firm has recently reported poor underwriting results, the PRA plans to request a copy of its 2019 business plan in light of the feedback published in the May 2018 letter.
7 November: Temporary Permission Regime
The PRA direction (PDF, 532KB) provides the notification process for EEA firms with passporting arrangements in respect of the UK to apply between 7 January 2019 and 28 March 2019 for temporary permission where the PRA is the relevant regulator.
Every month KPMG Ireland’s IFRS team is producing an update on the progress of the industry to date on the implementation of the new insurance accounting standard.