EIOPA

European Insurance Overview 2018
On 28 November, EIOPA published its European Insurance Overview for the year-end 2017. The Annual European Insurance Overview is published by EIOPA as an extension of its statistical services in order to provide an easy-to-use and accessible overview of the European insurance sector. The report is based on annually reported Solvency II information which ensures that the data has a high coverage in all countries and is reported in a consistent manner across the EEA.

Consultation on technical advice on integrating sustainability risks under Solvency II and IDD
On 26 November, EIOPA published a Consultation Paper on its draft technical advice on the integration of sustainability risks and factors in the delegated acts under the Solvency II and the Insurance Distribution Directive (IDD). 

On 24 May 2018, the European Commission (EC) adopted a package of measures on sustainable finance including proposals aimed at establishing a unified EU classification system of sustainable economic activities; improving disclosure requirements on how institutional investors integrate environmental, social and governance (ESG) factors in their investment and advisory processes; and creating a new category of benchmarks which will help investors compare the carbon footprint of their investments.

The EC subsequently requested EIOPA and ESMA to provide technical advice supplementing the initial package of proposals and to assist the EC on potential amendments to, or introduction of, delegated acts under the UCITS, Solvency II, AIFM, MiFID II and Insurance Distribution Directives regarding the integration of sustainability risks and sustainability factors.

Comments on the consultation must be submitted by 30 January 2019.

Q&A on regulation
On 3 December, EIOPA published new questions and answers on:

  • 2015-2450 templates for the submission of information to the supervisory authorities; and 
  • 2015-35 Solvency II delegated regulations supplementing Directive 2009-138.
EIOPA evaluates the European Insurance Intermediaries Markets
On 13 December, EIOPA published an evaluation of the structure of insurance intermediaries markets in Europe, as required by the Insurance Distribution Directive. EIOPA has found that whilst it remains difficult to collect standardized data and draw conclusions, some key developments in European markets have been identified, including: 
  • A decrease in the number of registered intermediaries - despite the number of total registered intermediaries having increased in some markets. The causes behind this trend are varied and Member State-specific, ranging from more stringent regulatory requirements and the growth of alternative innovative distribution channels to other factors such as the liquidation of some insurance undertakings. 
  • In most markets, the decrease of registered intermediaries has mainly affected natural persons and those operating as agents. Despite brokers and intermediaries registered as legal persons representing a small portion of the European intermediaries market, their number has been increasing at the European level and in most Member States.  
  • A significant number of intermediaries – representing 56% of the total number - are operating under Member State-specific categories. This diversity and lack of homogeneity makes it difficult to draw conclusions on the prevalent model(s) at the European level. 
  • Between 2013 and 2017 the number of intermediaries' notifications to carry out cross-border business has increased.
EIOPA announces results of the 2018 Insurance Stress Test
On 14 December, EIOPA announced the results of its 2018 Stress Test for the European insurance sector, the fourth stress test. The exercises conducted for 2018 assessed the resilience of the participating insurers towards three potential scenarios: 
  • a series of natural catastrophes; 
  • a yield curve up shock – this scenario alongside lapse and deficiency shocks, causes a sudden and sizable re-pricing of the risk premiums as well as an increase in the inflation of claims; and 
  • a yield curve down shock – this scenario together with the longevity of the stress would mean a protracted period of extremely low interest rates combined with an increase in life expectancy. 
42 European (re)insurance groups participated in the exercise, representing a market coverage of around 75% based on the total of consolidated assets.

Overall, the exercise confirmed the significant sensitivity of the European insurance sector to severe but plausible market shocks. In aggregate, the sector is adequately capitalised to absorb the prescribed shocks. Groups seem to be vulnerable not only to low yields and longevity risks but also to a sudden and abrupt reversal of risk premiums combined with an instantaneous shock to lapse rates and claims inflation. 

EIOPA also notes the exercise is an important step in the reassessment of capital requirements under adverse scenarios and provides a valuable basis for continuous dialogue with the participating groups on any identified vulnerabilities.

charles.portsmouth@moorestephens.com