1. SOLVENCY II

1.1 Council of the EU publishes final texts for Solvency II Directive Review and IRRD

On 25 January 2024, the Council of the EU (the Council) published its final compromise texts for:

  • the proposed Directive (2021/0295 (COD)) amending Directive 2009/138/EC (the Solvency II Directive) as regards to proportionality, quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks, group and cross-border supervision (Proposed Directive); and
  • the proposed Insurance Recovery and Resolution Directive (2021/0296/COD) (IRRD).

The final compromise texts reflect the political agreement reached between the Council and the European Parliament in December 2023.

The next step will be for the final texts to be agreed by the European Parliament. If approved, the Council and the European Parliament will then have to formally adopt the final texts.

A copy of the final text for the Proposed Directive can be accessed here.

A copy of the final text for the IRRD can be accessed here.

1.2 European Commission adopts draft Decision on Renewal of Equivalence of US under Solvency II regime

On 14 March 2024, the European Commission adopted a draft Commission Delegated Decision (C(2024) 1753) (the Draft Delegated Decision) on the renewal of its determination that the solvency regime operative in the US applicable to undertakings with their head office in that country is provisionally equivalent to that laid down in Title 1, Chapter VI of the Solvency II Directive.

Commission Delegated Decision (EU) 2015/2990 (the Current Delegated Decision) provides provisional equivalence under Article 227 of the Solvency II Directive to the US (as well as other non-EU jurisdictions). The Current Delegated Decision applies from 1 January 2016 until 1 January 2026.

The European Commission and the European Insurance and Occupational Pensions Authority (EIOPA) have concluded that the factual statements set out in the Current Delegated Decision relating to the US remain the same. As a result, and in accordance with Article 227 of the Solvency II Directive, the Draft Delegated Decision puts forward the renewal of the US provisional equivalence for ten years from 1 January 2026.

The Draft Delegated Decision is currently under consideration by the European Parliament.

A copy of the Draft Delegated Decision can be accessed here.

2. EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITY (EIOPA)

2.1 EIOPA publishes EU-wide Supervisory Priorities for 2024 - 2026

On 11 March 2024, EIOPA published its "Union-Wide Strategic Supervisory Priorities 2024-2026".

In its document, EIOPA identifies two strategic objectives that should be monitored in cooperation with the National Competent Authorities (NCAs) within the three-year cycle: i) financial robustness of insurance undertakings; and ii) consumer protection in a disruptive environment.

In consideration of both of these objectives, EIOPA has identified the following specific areas to be considered as supervisory priorities for 2024:

  • Continuous monitoring of the impact of the macroeconomic environment;
  • Risk transfers including the capacity and appropriateness of risk transfers; and
  • Value for money including in relation to inflation and current macro-economic trends.

A copy of EIOPA's "Union-Wide Strategic Supervisory Priorities 2024-2026" can be accessed here.

3. INSURANCE DISTRIBUTION DIRECTIVE (IDD)

3.1 EIOPA publishes Report on Application of the IDD

On 15 January 2024, EIOPA published its second report on the application of Directive (EU) 2016/97 (the Insurance Distribution Directive or IDD) (the Report).

The Report addresses how the IDD has been applied by the insurance industry and by NCAs.

The Report covers a number of topics, including:

  • Changes in the structure of the EU insurance distribution market;
  • Changes in the patterns of cross-border activity;
  • The improvement of quality of advice and selling methods and the impact of the IDD on insurance intermediaries which are small and medium-sized enterprises;
  • The impact of higher inflation and rising interest rates on the insurance market and customers;
  • Whether NCAs are sufficiently empowered and have adequate resources;
  • The impact of the new regulatory framework, noting challenges related to digitalisation, sustainability integration, and the need for additional guidance on the conditions under which a policyholder of a group insurance contract acts as an insurance intermediary; and
  • The impact of the IDD on the supervisory framework, noting shortcomings in its application in respect of conflicts of interest emerging from remuneration arrangements and cross-selling practices, causing harm to consumers and calling for more guidance on the product oversight and governance framework.

A copy of the Report can be accessed here.

3.2 EIOPA publishes Annual Report on Administrative Sanctions and Other Measures imposed under IDD

On 17 January 2024, EIOPA published its fourth annual report on administrative sanctions and other measures imposed under the IDD during 2022 (the Report).

The key findings of the Report can be summarised as follows:

  • In 2022, 2,762 sanctions were imposed across 21 Member States, with fines imposed of an aggregated value of EUR 528,807;
  • Since the IDD has been in effect in 2018, and particularly between 2021 and 2022, there has been an increase in the number of sanctions imposed for breaches of the information and conduct of business requirements under Chapter 5 and 6 of the IDD which cover rules on selling methods, product designs, and manging conflicts of interest. EIOPA has noted that these requirements include the most substantive consumer protection requirements set out in the IDD;
  • The majority of sanctions issued during 2022 relate to breaches of requirements on professional and organisational measures under Article 10 of the IDD. However, this feature has been driven by a high number of such sanctions in a small number of Member States; and
  • Since the implementation of the IDD, sanctions have been imposed in all but three Member States, and in most Member States a pattern is emerging of a broadly similar number of sanctions being imposed each year.

A copy of the Report can be accessed here.

To view the full article, click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.