1. Insurance Updates (1) Central Bank of Ireland publishes sixth annual Private Motor Insurance Report of the National Claims Information Database and (2) EIOPA launches consultation on one-to-one capital weight for EU insurers’ crypto asset investments
1. Central Bank of Ireland publishes sixth annual Private Motor Insurance Report of the National Claims Information Database
On 24 October 2024, the Central Bank of Ireland (“Central Bank”) published its sixth annual private motor insurance report (“Report”) of the national claims information database (“NCID”).
The Report captures data from calendar years 2009 to 2023. The NCID compiles aggregate data received from insurers. This allows the Central Bank to publish an annual report containing analysis on the cost of premiums, the cost of claims, the aggregated financial performance of the private motor insurance sector, and key settlement channel information. In the Report, the Central Bank explains that it produces the report “in an effort to improve the overall transparency of the private motor claims environment”
Some of the key findings of the Report, as per the Reports headings, include:
Cost of Insurance
- the total gross earned premium for private motor insurance in Ireland in 2023 was €1.29bn.
- between 2022 and 2023, the average written premium cost per policy increased 2% to €568;
- the average cost of a claim per policy increased by 5% in 2023 to €369;
- the level of cover has also increased in recent years - 93% of policies in 2023 had comprehensive cover, compared to 83% in 2017; and
- claims as a percentage of premiums increased to 67% in 2023 from 62% in 2022.
Income and Expenditure for 2023
- combined operating ratio was 86% gross and 91% net of reinsurance;
- operating profit was 8% of total income in 2023; and
- an operating loss of 1% on current year claims, was offset by reserve releases on prior years which contributed 9% to operating profit.
Settled Claims in 2023
- total settled claims cost was €693m in 2023; and
- for injury claims settled in 2023:
- 45% settled directly with an insurer with an average time taken to settle of 1.9 years;
- 17% settled through the Injuries Resolution Board with an average time taken to settle of 2.7 years; and
- 37% settled through litigation with an average time taken to settle was 5.1 years.
Personal Injuries Guidelines
- for injury claims settling directly or through the Injuries Resolution Board, almost all claims settling in 2023 settled under the Guidelines; and
- for injury claims settled through litigation in H2 2023:
- 27% settled under the Guidelines; and
- 73% settled with reference to the Book of Quantum.
Speaking on the launch of the Report, CEO of Insurance Ireland, Moyagh Murdock stated:
“Today’s figures published by the Central Bank reaffirm that insurers followed through on their commitment to pass on the benefits of Personal Injuries Guidelines and other reforms to consumers. Although premiums have begun to increase, reflecting the increased cost environment, Irish motor insurance customers have benefitted from significant decreases from 2017 to 2022, where premiums decreased by 23%.”
2. EIOPA launches consultation on one-to-one capital weight for EU insurers’ crypto asset investments
On 24 October 2024, the European Insurance and Occupational Pensions Authority (“EIOPA”) launched a public consultation (“Consultation”) on technical advice on standard formula capital requirements for investments in crypto assets.
Background
On 30 April 2024, The European Commission (“Commission”) requested technical advice from EIOPA on the Solvency II standard formula capital requirements for investments in crypto assets. EIOPA are required to submit the advice to the Commission by 30 June 2025.
Consultation
EIOPA have drafted the requested technical advice and are now opening it to consultation. The draft advice sets out
- the current prudential treatment of investments in crypto assets;
- assesses the appropriateness of that treatment; and
- recommends changes that could be made to the standard formula treatment.
In preparing the draft advice, EIOPA analysed EU insurers’ crypto holdings and the risks inherent in such holdings.
The main issue identified was the lack of clarity in the treatment of crypto assets under Solvency II which results in exposures being categorised as either intangibles or as equity risk type 2. This ambiguity raises concerns as to the risk sensitivity of such classification and the level of prudence. Added to this is the fact that crypto assets are a relatively new assets class in finance and their regulatory treatment is still evolving. As a result of the lack of specific provisions on crypto assets in the EU’s regulatory framework for insurers, there is no consistent approach taken by insurers.
Proposal
In view of the forgoing, EIOPA has proposed a 100% haircut to insurers’ crypto assets regardless of their balance sheet treatment and investment structure. Due to the fact that the market for crypto assets is still at an early stage, EIOPA has recommended that the prudential treatment of these assets be revisited at some point in the future to assess whether a different approach would be appropriate, specifically in relation to asset - referenced tokens and electronic money tokens authorised under MiCA.
Next Steps
EIOPA invites stakeholders to provide their feedback on the Consultation by responding to the questions via the online survey no later than 16 January 2025. All responses will be published on EIOPA’s website.
2. European Commission adopts Delegated and Implementing Regulations under DORA
On 23 and 25 October 2024, the European Commission (“Commission”) adopted three regulations supplementing the regulation on digital operational resilience for the financial sector (“DORA”) as follows:
This Delegated Regulation is on foot of a mandate under article 20 (3) of DORA and deals with the following matters:
- Article 1 sets out the general information to be provided in initial notifications and intermediate and final reports on major ICT-related incidents;
- Article 2 sets out the specific information to be provided in initial notifications;
- Article 3 defines the specific information to be provided in intermediate reports;
- Article 4 defines the information that needs to be provided by the financial entities on the major ICT related incident in their final report;
- Article 5 details the time limits for the initial notification, and for the intermediate and final reports; and
- Article 6 sets out the content of the voluntary notification in relation to significant cyber threats as referred to in Article 19(2) of DORA.
Next Steps
The Council of the EU and the European Parliament will consider the Delegated Regulation. If there are no objections, it will be published in the Official Journal of the European Union (“Official Journal”) and will come into force on the twentieth day after such publication.
This Implementing Regulation is on foot of a mandate under article 20 (4) of DORA and sets out details as to the templates and forms to be used, as follows:
- Article 1 addresses the template to be used for reporting ICT - related major incidents;
- Article 2 deals with the joint submission of initial notification, intermediate and final reports;
- Article 3 deals with situations where there are recurring ICT - related incidents that cumulatively meet the conditions for one major ICT - related incident;
- Article 4 addresses the use of secure electronic channels by financial entities;
- Article 5 deals with the reclassification of major ICT - related incidents;
- Article 6 sets out details as to notification of outsourcing of the reporting obligations;
- Article 7 covers aggregated reporting; and
- Article 8 deal with notification of significant cyber threats.
Next Steps
The Implementing Regulation will be published in the Official Journal without further scrutiny and will come into force on the twentieth day after such publication.
This Delegated Regulation is on foot of mandate under Article 41(1) of DORA. The draft RTS focus on the areas of the mandate having a direct impact on financial entities and ICT third-party service providers. They cover the following:
- Article 1 sets out the information to be provided by ICT third-party service providers in the application for a voluntary request to be designated as critical;
- Articles 2-5 lay down the content of information to be provided by critical ICT third-party service providers to the Lead Overseer (Article 2), including the information to be provided after the issuance of recommendations (Article 3), the structure and format of the information (Article 4) and the information on subcontracting arrangements that will have to be provided (Article 5);
- Article 6 covers the competent authorities’ assessment of the measures taken by critical ICT third-party service providers based on recommendations of the Lead Overseer.
Next Steps
The Council of the EU and the European Parliament will consider the Delegated Regulation. If there are no objections, it will be published in the Official Journal and will come into force on the twentieth day after such publication.
3. ESMA consults on amendments to MiFID research provisions
On 28 October 2024, the European Securities and Markets Authority (“ESMA”) launched a consultation (“Consultation”) on the technical advice to the European Commission (“Commission”) on the amendments to the research provisions in the MiFID II Delegated Directive.
The Consultation is targeted at competent authorities, firms that are in scope of MiFID II, research providers and investors.
Background
On 6 June 2024, ESMA received a request from the Commission for technical advice on the implementation of the amendments to various directives in the context of the Listing Act. This Consultation focuses on the changes in MiFID II related to the payment for research and execution services.
The Consultation
- section 2 of the Consultation sets out a new payment option and conditions for research not to be treated as an inducement;
- section 3 of the Consultation deals with the proposed changes by the Commission to Commission Delegated Directive (EU) 2017 / 593. The section contains six questions for the consideration of interested stakeholders; and
- section 4 of the Consultation contains the Annexes, as follows:
- annex I – summary of the questions posed;
- annex II – relevant extract from the Commission’s request for advice to ESMA;
- annex III – a cost – benefit analysis; and
- annex IV contains the proposed draft amendments to Commission Delegated Directive (EU) 20107 / 593.
Next Steps
The Consultation is open until 28 January 2025. ESMA has stated that responding parties should include a clear rationale for any comments made and describe any alternatives ESMA should consider. ESMA has stated it will consider the feedback received to this consultation and expects to publish a final report to submit its technical advice to the Commission in Q2 2025.
4. The European Banking Authority Publishes Consultation Paper on Draft Regulatory Technical Standards on Treatment of Structural FX Positions under CRR
On 28 October 2024, the European Banking Authority (“EBA”) published a consultation paper (“Consultation��) on Draft Regulatory Technical Standards (“RTS”) on the treatment of structural foreign exchange (“structural FX”) positions under Article 104c of the Capital Requirements Regulation (“CRR”).
The EBA is required to ensure that the treatment of structural FX positions is developed in such a way that harmonised interpretation and implementation is provided across the EU. In order to satisfy this mandate, the EBA published guidelines in 2020 (“Guidelines”) on how to implement the structural FX provision considered in Article 352(2) CRR.
The proposals set out in the Consultation paper largely mirror the provisions set out in the Guidelines, with a few notable changes:
- introduction of clear quantitative thresholds for a currency to be considered eligible for the structural FX treatment – this proposal seeks to reduce variability in the currencies that were considered relevant under the Guidelines;
- the possibility for banks to consider only credit risk own funds requirements when determining the position neutralising the sensitivity to the capital ratios, provided that the credit risk own funds requirements are driving the variability of the ration against FX changes;
- clarifications on how institutions are to remove the risk position from the own funds requirement for foreign exchange risk; and
- provisions on institutions’ policies in relation to currencies that are particularly illiquid in the market (eg due to EU restrictive measures).
In addition, the Consultation paper also sets out a proposal for reporting on structural FX permissions granted by competent authorities, and includes a reporting template and instructions as annexes. The draft RTS are detailed in section 4 of the Paper.
Next Steps
The EBA welcomes comments on the proposals in the Consultation paper, and has included a number of specific questions in section 5.2 of the Paper. The Consultation is open until 7 February 2025. The EBA has stated that it will assess the feedback received during the Consultation, before submitting the final draft to the European Commission.
5. Financial Action Task Force’ Public Consultation on Anti-Money Laundering and Counter-Terrorist Financing Standards
On 28 October 2024, the Financial Action Task Force (“FATF”) opened a public consultation (“Consultation”) on revisions to the FATF Recommendations. This is part of its programme to address the unintended consequences its of anti - money laundering (“AML”) and counter - terrorist financing (“CTF”) measures and to better align them with measures to promote financial inclusion.
Background
The FATF Recommendations are a comprehensive framework of measures to help countries address illicit financial flows that drive crime and terrorism.
Consultation
The proposed amendments to the FATF Recommendations focus on promoting financial inclusion through increased emphasis on proportionality and simplified measures in the risk - based approach, which in turn hopes to provide countries, supervisors and financial institutions greater confidence and assurance when implementing these measures.
The revisions focus on Recommendation 1 (Assessing money laundering and terrorist financing risks and applying a risk-based approach) and its Interpretive Note, as well as corresponding changes to Recommendations 10 (Customer due diligence) and 15 (New technologies) and their related definitions. The public consultation focusses particularly on the following issues:
- replacing “commensurate” with “proportionate” in Recommendation 1 – the FATF states that this aims to clarify the application of concepts in relation to the risk - based approach and to set clearer expectations regarding simplified measures;
- require supervisors to “review and take into account the risk mitigation measures undertaken by financial institutions” to ensure that proportionality is considered when engaging with the FATF;
- replacing “countries may decide to allow simplified measures” with “countries should allow and encourage simplified measures” – the aim is for countries to more actively promote the implementation of simplified measures; and
- adding a qualification to “non-face-to-face customer identification and transactions” of “(unless appropriate risk mitigation measures have been implemented)” – this is to better reflect technological advancements which may reduce risks associated with non-face-to-face interactions, and also to recognise that this has become the predominant mode of interaction with financial institutions in many countries.
Next Steps
The Consultation is open until 6 December 2024. The FATF welcomes comments on the proposals set out in the Consultation.