1. Central Bank’s Insurance Quarterly Newsletter is published
On 17 September 2024, the Central Bank of Ireland (“Central Bank”) published its insurance quarterly newsletter (“Newsletter”). The Newsletter is an important communication tool used by the Central Bank to convey news and insights relevant to the insurance sector as well as the Central Bank’s expectations and priorities around existing requirements and views on future developments. Some of the key highlights from this edition include:
1. Thematic Review of Climate Change Risk Materiality Assessments
The Central Bank has previously stated that one of its strategic priorities is climate change risk, with materiality assessments being a supervisory focus for 2024. A thematic review (“Review”) of the materiality assessments of 29 firms was recently completed by the Central Bank, encompassing firms from non-life, life, and reinsurance sectors and spanning all PRISM impact ratings. The Newsletter notes that the majority of firms reviewed have made good efforts to meet the Central Bank’s Guidance for (Re)Insurance Undertakings on Climate Change Risk. In order to support the insurance sector in firms building capacity, expertise and experience, and further integrating climate change risk into their governance and risk management frameworks, the Newsletter sets out some key feedback from the Review, highlighting areas of stronger and weaker practice including:
Stronger practices:
- Using the baseline scenario as a clear coherent foundation for the work;
- Analysis of potential exposures to climate change risk in all risk categories and over all time horizons; and
- Clear conclusions on the materiality of climate change risks.
Weaker practices:
- Not sufficiently challenging the reasonableness of conclusions; and
- Not considering climate change risks in ongoing strategic decision-making and integrating into business models.
The Newsletter emphasises that consideration of climate change risks will continue to be a feature of regular supervisory engagements and indeed will expand over time. Firms are encouraged to build on their analysis of climate change risks which will facilitate a greater understanding of material risk exposures, including what implications the results might have for its current and planned strategy and business model.
2. Observations from Unclaimed Life Policies Inspections
Being the regulatory authority for life assurance business in Ireland, the Central Bank has a responsibility to ensure life firms comply with The Unclaimed Life Assurance Policies Act 2003 (“2003 Act”) to include the carrying out of inspections on the systems and procedures in place. The latest such inspection was carried out recently and the Newsletter sets out some key findings include positive practices and practices requiring improvement, in addition to a number of potential enhancements that were also identified as part of the inspection.
3. Observations from Personal Injuries Guidelines Inspections
The Newsletter shines a spotlight on the development of the Personal Injuries Guidelines (“Guidelines”), their impact since introduction and the findings from a recent thematic inspection on their implementation. The Newsletter emphasises the importance of firms continuing to closely monitor the impact of the Guidelines. In particular the Newsletter highlighted the Central Bank expectations of firms in this regard including:
- maintaining a prudent approach following the implementation of the Guidelines;
- closely monitoring the changing trends in awards through trend analysis and management information;
- regularly report this information to the board; and
- support claims staff through the provision of policies, guidance documentation and appropriate training.
4. Central Bank Workshop on the Responsible Use of Big Data & Related Technologies
The Newsletter gives a summary of the workshop hosted by the Central Bank on the Responsible Use of Big Data and Related Technologies (“BD&RT”) on 24 June 2024. The Newsletter also highlights next steps that will be taken by the Central Bank on foot of the points discussed at the workshop.
The opening remarks were made by Gerry Cross, Director of Financial Regulation, Policy and Risk, Central Bank. Julian Arevalo of EIOPA provided an update on the Artificial Intelligence (AI Act). There were also a group breakout discussion on key themes in relation to the use of BD&RT, some of which were as follows:
- general governance and risk management;
- data usage and management of data; and
- ethical and fair usage of BD&RT in avoiding consumer detriment.
5. Stakeholder Engagement
Insurance Sector - Forthcoming Thematic & Information Requests – Q4 2024
The Newsletter sets out that there will be a risk management framework review in Q4 2024, comprising of an assessment of risk management frameworks for selected firms in the domestic non-life sector.
Insurance Sector - Bilateral Engagements & Publications – Q4 2024
Including publication of the Intermediary Times, National Claims Information Database (NCID) Private Motor Annual Report; and the Insurance Newsletter (December). As well as the bi-lateral quarterly meeting between Central Bank and Insurance Ireland.
Insurance Sector Speaking Engagements & Events
The Newsletter details a number of speaking engagements and events between September 2024 and November 2024 covering such issues as the future of talent in financial services, Operational Resilience, DORA and the Retail Intermediary Roadshow.
6. EIOPA Updates
Solvency II Review – Consultations
The Newsletter addresses the two consultations recently launched by EIOPA on responses to the European Commission’s requests for advice on the topics of proportionality and direct exposures to qualifying central counterparties. For more detail please see the FIG Top 5 at 5 dated 8 August 2024.
General EIOPA Updates
The Newsletter highlights the July 2024 opinion of EIOPA regarding the supervision of captive (re)insurance undertakings. For more detail please see the FIG Top 5 at 5 dated 4 July 2024.
EIOPA’s follow up report on its peer review on the collaboration of supervisory authorities is also emphasised in the Newsletter.
7. Authorisations & Gatekeeping Report
The Newsletter highlights the inaugural publication of the Central Bank’s Authorisations & Gatekeeping Report. For more detail please see the FIG Top 5 at 5 dated 4 July 2024.
8. Targeted Assessment: Consumer Protection Risk Management Frameworks in Insurance Firms
The recent Central Bank assessment of insurance firms’ consumer protection risk management frameworks was addressed in the Newsletter, with the Central Bank emphasising that through its structured engagement with firms over the coming months, it will continue to focus on firms’ consumer protection risk management frameworks to ensure that action is being taken and progress is being made following the recent Dear CEO Letter, particularly with those firms that have less mature frameworks. For more detail please see the FIG Top 5 at 5 dated 5 September 2024.
9. Central Bank Updates
The Newsletter provides updates on the following:
- launch of the open data portal; and
- innovation engagement, which includes consideration of the Innovation Sandbox Programme. For more detail please see FIG Top 5 at 5 dated 6 June 2024.
2. Additional Central Bank Updates
1. Central Bank publishes addendum to the Consumer Protection Code
On 17 September 2024, the Central Bank of Ireland (“Central Bank”) published an addendum (“Addendum”) to the Consumer Protection Code (2012) (“Code”).
The Addendum stems from amendments required to the Code as a result of the introduction of the European Union (Credit Servicers and Credit Purchasers) Regulations 2023 which gave effect to Directive 2021/2167/EU. This Directive sets out a common authorisation and supervisory framework and requirements in respect of credit servicers of a creditor’s rights under a non - performing credit agreement, or of the non - performing credit agreement itself, issued by a credit institution, who act on behalf of a credit purchaser.
The purpose of the Addendum is to apply the Code to credit servicers within the meaning of Directive 2021/2167/EU.
The following parts of the Code have been amended as of 17 September 2024:
- Chapter 1 – Scope
Under the application section in Chapter 1 an additional bullet point has been added to the list detailed below the second paragraph in that section, as follows:
“Credit Servicers”
- Chapter 12 – Definitions
A definition has been added to Chapter 12 as follows:
“credit servicer” has the meaning given to it in Article 3 of Directive 2021/2167/EU
For a more detailed analysis please see Matheson’s Financial and Capital Markets group’s recent insight on the EU Credit Servicing Directive – Amendment to Consumer Protection Code.
2. Central Bank updates various forms and guidance documents – relating to CPC, F&P, MCC and authorisation applications forms
In the third week of September 2024, the Central Bank of Ireland (“Central Bank”) updated a considerable number of its forms and guidance. The following is a brief note on the updates:
Authorisation Process
- Application Form for Authorisation as a Retail Intermediary - A FORM - Under the: Investment Intermediaries Act 1995 (IIA); European Union (Insurance Distribution) Regulations 2018 (IDR); European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (CMCAR); Consumer Credit Act 1995 (CCA) (updated 18 September 2024) – can be found here
- Application Form for Authorisation as a Retail Intermediary - B FORM - Under the: Investment Intermediaries Act 1995 (IIA); European Union (Insurance Distribution) Regulations 2018 (IDR); European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (CMCAR); Consumer Credit Act 1995 (CCA) (updated 18 September 2024) can be found here
- Application Form for Authorisation as a Retail Credit Firm or Home Reversion Firm - Under the Central Bank Act 1997 (as amended). This form has been updated as of September 2024 – can be found here. The Guidance has also been updated as of September 2024 – can be found here
- Guidance Note on Completing an Application for Authorisation as a Retail Credit Firm or Home Reversion Firm - Under the Central Bank Act 1997 (as amended) (updated September 2024) - can be found here
Minium Competency Code
Central Bank - Minimum Competency Code 2017 and Minimum Competency Regulations 2017 - Questions and Answers (updated 17 September 2024) (there are minor wording amendments to section 12.2 and 13.2) – can be found here
Fitness and probity
Fitness and Probity - Individual Questionnaire Application - Draft Guidance (updated 18 September 2024) – not yet available on Central Bank website.
Code of Conduct on Mortgage Arrears
Addendum to the Code of Conduct on Mortgage Arrears (2013) (September 2024) – can be found here
3. Government Legislation Programme Autumn 2024 – a financial services perspective
On 18 September 2024, the Government Legislation Programme for Autumn 2024 was published ("Autumn Programme"). The Programme identifies 29 bills to be prioritised for publication and 32 bills to be prioritised for drafting. It also includes legislation which is currently before the Houses of the Oireachtas. Those of direct relevance to financial services are outlined below:
Legislation for Priority Publication
Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill will amend the Criminal Justice Act 2010 to ensure that Crypto Asset Service Providers are covered by national law in relation to Ireland’s Anti-Money Laundering and Terrorist Financing regime. The Autumn Programme indicates that the Heads of Bill are in preparation.
Credit Review Bill will put S.I. No.127 of 2010 which established the Credit Review Office on a statutory footing. This was also included in the Summer Legislation Programme as 'legislation for priority publication' and the Heads of Bill were approved in July 2021. The Autumn Programme indicates that work is ongoing.
Health Insurance (Amendment) Bill will amend the definition of High-Cost Claims Credits in the Health Insurance Act 1994; to amend the Health Insurance Act 1994 to specify the amount of premium to be paid from the Risk Equalization Fund in respect of certain classes of insured persons; to make a consequential amendment to the Stamp Duties Consolidation Act 1999 and to provide for related matters. The Autumn Programme indicates that the Heads of Bill were approved in September 2024.
Legislation for Priority Drafting
Violation of Restrictive Measures Bill will transpose EU Directive 2024/1226 on the definition of criminal offences and penalties for the violation of Union. The Autumn Programme indicates that the Heads of Bill are in preparation.
All Other Legislation
Co-operative Societies Bill will place the co-operative model on a more favourable and clear legal basis, thereby creating a level playing field with companies and encouraging the consideration of the cooperative model as an attractive formation option for entrepreneurs. The Autumn Programme indicates that Pre-Legislative Scrutiny was completed in May 2023.
Asset Covered Securities (Amendment) Bill will amend the Asset Covered Securities Act 2001 to allow for the carrying on of Asset Covered Securities Business by Credit Institutions that are not restricted to the carrying on of Asset Covered Securities Business only; and to provide for related matters. The Autumn Programme indicates that the Heads of Bill are in preparation.
Restrictive Measures Bill will create a mechanism by which persons would be obliged to adhere to the asset freezing requirements of certain UN Security Council Resolutions in the period prior to their incorporation in an European Union legislative act, i.e. a ‘bridging measure’, in order to meet Ireland’s international obligations and prevent sanctions evasion. This was included under 'all other legislation' in the Summer Legislation Programme and the Autumn Programme indicates that Heads of Bill are in preparation.
Bills currently before the Houses of the Oireachtas
Finance (Provision of Access to Cash Infrastructure) Bill 2024 is currently at Dáil Éireann, second stage. The purpose of this bill is to provide Irish people with easier access to cash and make it a requirement for ATM operators and Cash-In-Transit Companies to be authorised and supervised by the Central Bank of Ireland.
Financial Services and Pensions Ombudsman (Amendment) Bill 2023 is currently at Dáil Éireann, third stage. The purpose of this bill is to amend the Financial Services and Pensions Ombudsman Act 2017 so that it takes into consideration the Zalewski ruling. It is also intended to update parts of the legislation where there is a possibility that the FSPO could be viewed as administering justice.
Motor Insurance Insolvency Compensation Bill 2024 is currently at Seanad Eireann, second stage. The bill will transpose Article 10a and 25a of the revised EU Motor Insurance Directive (Directive 103/2009/EC) as amended by Directive 2021/2118.
The FIG Top 5 at 5 will continue to monitor the progress of these legislative initiatives and update clients when appropriate.
4. Public Consultation on the implementation of the Consumer Credit Directive 2 is announced
On 19 September 2024, the Department of Finance (“Department”) opened a public consultation (“Consultation”) on the implementation of the Directive (EU) 2023/2225 - the Consumer Credit Directive 2 (“CCD2”).
Context
In June 2021, the European Commission (“Commission”) published a proposal to replace the 2008 Consumer Credit Directive (2008/48/EU) to address developments in consumer credit markets such as digitalisation and the emergence of new providers and products. In October 2023, CDD2 was published in the Official Journal of the EU.
The majority of the provisions in CCD2 will be transposed on a fully harmonised basis across the EU. However, there are some 23 national discretions in CCD2 where each Member State has discretion on the application of the particular provisions. The Department is conducting a four - week public consultation on the application of these discretions by Ireland.
Chapter 3 (and its sub-chapters) of the Consultation documents the discretions contained in CCD2 and poses questions which are to be considered in respect of those discretions. At a high level they consider such matters as:
- exemptions of certain credit agreements and certain organisations from the application of CCD2 where they meet particular conditions;
- amendments to required pre – contractual information in certain instances;
- amendments to requirements regarding adequate explanations given to the consumer to support assessment of appropriateness;
- rights of the creditors to impose certain obligations on borrowers;
- right to use the terms “independent advice or advisor”
- rights to provide advisory services;
- the prevention of certain advertising practices;
- whether additional consumer protection provisions are required over and above those provided for in CCD2;
- entitlements regarding compensation;
- caps on certain charges and bans on commissions; and
- role of the Central Bank of Ireland in certain situations.
Each Consultation question is linked, in the Consultation document, to the relevant article of CCD2.
Those responding to this consultation are invited to give their views on the specific questions set out in the Consultation; provide details of any issues or concerns regarding the questions being responded to; and where appropriate, provide some analysis or views on the regulatory and / or financial impact of the proposed approach.
Next Steps
The Consultation is open until 16 October 2024. The submissions received in response to the Consultation will inform the Department’s consideration on the transposition of CCD2 into Irish law.
5. Appointment of Commissioner-designate for Financial Services and the Savings and Investments Union
On 17 September 2024, European Commission President, Ursula von der Leyen announced the composition of the new College of Commissioners. Maria Luís Albuquerque has been appointed as Commissioner-designate for Financial Services and the Savings and Investments Union. Commissioner – designate Albuquerque, a Portuguese national and former Portuguese Finance Minister, has held many notable positions over the course of her career, including as a member of the Expert Group, High -Level Forum on Capital Markets Union of the European Commission from 2019 to 2020.
In her mission letter (“Mission Letter”) to Commissioner – designate Albuquerque, the President sets out generally what she considers important in terms of matters that all Commissioners should have regard to. She also addresses recent reports that she states should be drawn on by all Commissioners including the Draghi Report on the future of European competitiveness and the Letta Report on the future of the single market. For more detail on the former, please see the FIG Top 5 at 5 dated 12 September 2024.
With particular reference to the role of Commissioner for Financial Services and the Savings and Investment Union, Ms von der Leyen states that Europe needs to unlock financing required for the green, digital and social transition. She highlights that Europe must address the lack of private capital such that our markets will be strengthened, while stressing the importance that this is carried out with the safeguarding of financial stability at its core. Additionally, the Mission Letter emphasises that better access to finance for EU businesses and better opportunities for citizens to improve their financial security must be prioritised. This, the Mission Letter goes on to state, will further the Commission’s goal of being an “investment commission”.
The Mission Letter goes on to detail the specific actions to be taken by Commissioner – designate Albuquerque in order to achieve the forgoing, including:
- the development of a European savings and investments union including banking and capital markets, with a particular focus on fostering capital for innovation / unlocking digital finance / harnessing sustainable finance / ensuring the competitiveness of the financial sector;
- the design of simple and low – cost saving and investment products at EU level in order to address the fragmentation of the capital markets;
- a focus on private and occupational pensions to help EU citizens with retirement and to channel savings into the economy;
- a review of the regulatory framework with the aim of ensuring that growing European companies and start – ups can finance their expansion in Europe;
- the scaling up of sustainable finance, particularly transition finance and climate resilience. The development and transparent categorisation of financial products and services with sustainability features should be promoted, together with a focus on the implementation of the sustainable finance framework - specifically ensuring ease of compliance and reporting;
- an increase in the availability of venture and other risk capital;
- the ensuring that rules applicable to the financial sector are adequately enforced across member states with the goal of preventing risks to financial stability;
- further development of the banking union to include a way that the European deposit insurance scheme can be progressed;
- a focus on non – bank financial institutions as regards macro – prudential aspects;
- the unlocking of bank financing to include reviving the use of securitisation;
- ensuring that appropriate protection is afforded to consumers and retail investors as regards EU rules, to include the development of a strategy on financial literacy;
- the improving of digital finance and payments such that new technologies in the financial system are supported;
- the implementation and enforcement of the anti – money laundering and countering the financing of terrorism package, to include preparing the launch of the AMLA; and
- a strengthening of Europe’s strategic approach to sanctions such that Europe is in a position to react flexibly to threats from cyber and hybrid attacks, to include the closing of any loopholes in implementation.
Next Steps
Commissioner – designate Albuquerque, as with all Commissioners – designate, must appear before the parliamentary committee with responsibility for her proposed portfolio. Committee members then vote on the nominee’s suitability for the position. The President, the High Representative of the Union for Foreign Affairs and Security Policy and the other members of the Commission are then subject, as a body, to a vote of consent by the Parliament. Following Parliament's vote, the President of the European Commission and the Commissioners are appointed by the European Council.