insurance

Insurance regulatory news, June 2021 #2

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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.

Contents:
UK Solvency II review: PRA information on quantitative impact study
PEPP Regulation: Delegated Regulations on supervisory reporting and product intervention
PEPP Regulation: EIOPA guidelines on supervisory reporting
AI governance principles: EIOPA report
IAIS Holistic Framework Baseline Assessment: aggregate report
UK Solvency II review: PRA information on quantitative impact study
The Prudential Regulation Authority (PRA) has published a webpage setting out information about its forthcoming quantitative impact study (QIS), which will support HM Treasury’s review of the UK Solvency II regime.

The QIS is a data collection exercise, which will assist the PRA’s analysis of potential reform options. The QIS will cover three main areas:

the calculation of the matching adjustment (MA); and
risk margin; and
the transitional measure on technical provisions (TMTPs).
It will also contain qualitative questions to gather information to support the development of some areas of Solvency II reform that are less straightforward to assess quantitatively.

The PRA explains that the QIS is relevant to all PRA-regulated insurance firms and it will be launched in summer 2021. The PRA will confirm the exact launch date and it will ask firms to respond to the QIS within three months.

While participation in the QIS is voluntary, the PRA strongly encourages UK insurance firms from all sectors to take part given the importance of the Solvency II review.

Anna Sweeney, PRA Executive Director, Insurance, also discussed the proposed QIS in a speech given on 15 June 2021.

PEPP Regulation: Delegated Regulations on supervisory reporting and product intervention
The following Delegated Regulations made under the Regulation on a pan-European personal pension product (PEPP) (PEPP Regulation) have been published in the Official Journal of the EU:

Commission Delegated Regulation 2021/895 supplementing the PEPP Regulation with regard to product intervention;
Commission Delegated Regulation 2021/896 supplementing the PEPP Regulation with regard to additional information for the purposes of the convergence of supervisory reporting; and
Commission Delegated Regulation 2021/897 laying down implementing technical standards (ITS) for the application of the PEPP Regulation with regard to the format of supervisory reporting to the competent authorities and the cooperation and exchange of information between competent authorities and with the European Insurance and Occupational Pension Authority (EIOPA).
The Delegated Regulations will enter into force on 24 June 2021.

PEPP Regulation: EIOPA guidelines on supervisory reporting
EIOPA has published guidelines on supervisory reporting for the PEPP under the PEPP Regulation. The aim of the guidelines is to ensure the common, uniform and consistent application of PEPP supervisory reporting requirements regarding the details of the nature, scope and format of the information to be submitted by PEPP providers to competent authorities at predefined intervals and on occurrence of predefined events.

The guidelines complement Delegated Regulation 2021/895, Delegated Regulation 2021/896 and Delegated Regulation 2021/897 (see report above).

The guidelines are addressed to competent authorities and financial institutions that are PEPP providers. They will apply from 22 March 2022.

AI governance principles: EIOPA report
EIOPA has published a report from its Consultative Expert Group on Digital Ethics (the Expert Group), setting out artificial intelligence (AI) governance principles towards ethical and trustworthy AI in the EU insurance sector.

The report sets out six governance principles that have been developed by the Expert Group to promote ethical and trustworthy AI in the EU insurance sector. The principles cover proportionality; fairness and non-discrimination; transparency and explainability; human oversight; data governance of recordkeeping; and robustness and performance. They are accompanied by non-binding guidance for insurance firms on how to implement the principles in practice throughout the AI system’s lifecycle when putting in place risk-based and proportionate measures.

The Expert Group acknowledges that AI is an evolving technology and, therefore, the recommendations in the report may need to be revised in due course.

IAIS Holistic Framework Baseline Assessment: aggregate report
The International Association of Insurance Supervisors (IAIS) has published an aggregate report giving the results and observations from the baseline assessment (BLA) of the implementation of supervisory material related to the IAIS Holistic Framework for the assessment and mitigation of systemic risk in the insurance sector (Holistic Framework).

The Holistic Framework includes an enhanced set of supervisory policy measures for macroprudential purposes, designed to increase the overall resilience of the insurance sector and help prevent insurance sector vulnerabilities and exposures from developing into systemic risk. The BLA is the starting point for the implementation assessment of the Holistic Framework supervisory material.

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