Insurance Regulatory eBulletin - EIOPA

Draft Regulatory Technical Standards for PI insurance and for financial capacity of intermediaries
On 27 June, EIOPA published its draft Regulatory Technical Standards (RTS), under the Insurance Distribution Directive (IDD), which adapts the base euro amounts for professional indemnity insurance (PII) and financial capacity. EIOPA is required to regularly review the amounts for PII for insurance and reinsurance intermediaries.

The paper outlines the draft RTS, the framework for the calculation of the amounts and rates of change, as well as some of the findings that emerged from EIOPA's review of the market for PII and of the insurance intermediaries market (including feedback from EIOPA's Insurance and Reinsurance Stakeholder Group on the review).

The figures have changed as follows. The minimum amount per claim is increased from €1,250,000 to €1,300,380. The minimum amount for all claims per year is increased from €1,850,000 to €1,924,560. Finally, the minimum amount of €18,750 of financial capacity is increased to €19,510.

Solvency II: the way ahead
On 26 June, EIOPA published a speech delivered by its Chairman, Gabriel Bernardino, at Insurance Europe’s Solvency II Conference held in Brussels. He discussed the success of the implementation of Solvency II, the reviews in place, and looking at supervisory convergence going forward.

In terms of the reviews of Solvency II, EIOPA is focussing on the following issues:

• increasing proportionality through reduction of complexity;
• removing technical inconsistencies relating primarily to interest rate risk;
• removing unjustified constraints to financing the economy particularly for unrated debt and unlisted equity.
Looking ahead, he noted the focus is on ensuring supervisory convergence because supervisory practices differ substantially across Europe due to the different traditions and different starting points.
EIOPA seeks evidence on the use of big data
On 9 July, EIOPA issued a call for evidence on the use of big data as part of a EU-wide thematic review. The review will collect empirical evidence on the use of big data by insurance undertakings and intermediaries, focusing specifically on the motor and health insurance markets, and will:

• analyse the benefits and risks of big data;
• assess business models and data quality issues, including consumer implications;
• improve understanding of new data types and data analytics tools used by insurance undertakings and intermediaries;
• determine possible supervisory and regulatory action requirements.

The review will be conducted using quantitative and qualitative input from the insurance industry, consumer associations, and National Competent Authorities. EIOPA will collect data between July and August 2018 and aims to publish its main findings in the first quarter of 2019.
Q&A on the application of the Insurance Distribution Directive
On 11 July, EIOPA published its first set of Questions & Answers (Q&As) providing practical guidance on the application of the Insurance Distribution Directive (IDD) and its implementing regulations. The Q&As cover:

• the requirements for the product oversight and governance arrangements;
• the additional regulatory requirements for insurance-based investment products.

EIOPA will continue to address and subsequently publish the answers to any further questions raised.
EIOPA launches EU-wide thematic review on consumer protection issues in travel insurance
On 17 July, EIOPA launched a thematic review on consumer protection issues in travel insurance. The review is aimed at better identifying and tackling any sources of consumer detriment.

Through the review, EIOPA will assess potential sources of consumer detriment stemming from how travel insurance products are designed, distributed and sold within the EU. In particular, EIOPA will consider the impact of emerging distribution and business models on consumers and, more broadly, on the insurance industry. Where the impact results in consumer detriment, EIOPA intends to identify the steps needed to ensure that consumers are treated fairly.
Failures and near misses in insurance: an overview
On 17 July, EIOPA published a report aiming to provide a more fundamental understanding of the leading causes of insurers' failures and near misses. It is the first in a series of papers aimed at enhancing supervisory knowledge on the prevention and management of insurance failures, based on the information contained in the EIOPA database, which comprises a sample of 180 affected insurance undertakings in 31 European countries, dating  from 1999 to 2016.
Q&A on regulation
On 18 July EIOPA published new sets of Questions & Answers on various regulations, directives and guidelines including:

• the guidelines on the use of internal models;
• the guidelines on the look through approach;
• the guidelines on the loss-absorbing capacity of technical provisions and deferred taxes.
Further guidance on the Key Information Document for PRIIPs
On 20 July, the European Supervisory Authorities (comprising the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA)) published further guidance on the Key Information Document (KID) requirements for Packaged Retail and Insurance-based Investment Products (PRIIPs).

The guidance aims to promote common supervisory approaches and practices based on continuing work to monitor the implementation of the KID. The guidance consists of:

• additional Q&A;
• updates to the flow diagrams for the risk and reward calculations.

The European Supervisory Authorities will assess if further guidance is required, based on additional questions received.
EIOPA's response to the EC consultation on the EU Framework for public reporting by companies
On 24 July, EIOPA issued a response to an EC consultation addressing the fitness of the current European framework for the public reporting by companies. EIOPA's response to the initiative focuses particularly on the public reporting of insurance and reinsurance undertakings in Europe and the application of Solvency II and IFRS 17.
EIOPA’s Risk Dashboard for the first quarter 2018
On 24 July, EIOPA published its updated Risk Dashboard based on first quarter 2018 data. The Dashboard shows that the risk exposure of the insurance sector in the European Union remains stable overall with a decline in both macro and insurance risk but an increasing trend in terms of potential market risks arising from higher volatility in bond markets.