CBI Publishes Insurance Newsletter For June 2023 – Reinsurance

The Central Bank of Ireland (CBI) recently published its insurance newsletter for June 2023. The main
highlights were:

• Product Oversight and Governance (POG)
  inspection – following a thematic inspection of POG
  arrangements in six non-life insurers, the CBI identifies a number
  of good practices which others may wish to consider, such as the
  Chief Risk Officer acting as ‘gatekeeper’ for considering
  the materiality of product changes, establishing a dedicated
  wording committee, a formal schedule of product reviews and
  implementing control systems over policy wordings and non-standard
  endorsements.




• UL products survey –
  EIOPA published a supervisory statement in November 2021 on the
  assessment of the value for money of unit-linked (UL) insurance
  products, following concerns raised by national competent
  authorities. In 2022, UL products represented 82% of the GWP of
  life insurers authorised by the CBI. The CBI notes that value for
  money can be a difficult concept to define, but it has focused on
  the deductions (i.e. commissions and charges) aspect of value for
  money, particularly to identify any outliers with higher
  deductions. In July 2022, the CBI issued a survey to all life
  insurers authorised by the CBI that currently sell UL products in
  Ireland or elsewhere and the analysis of the responses received
  concluded that in general the deductions being made by such life
  insurers are not undue. However, the newsletter warns that this
  conclusion does not mean that the CBI will not review commission
  levels or product benefits in future (particularly in the
  context of the upcoming review of the Consumer Protection
  Code).




• Reinsurance – following increasing
  engagement with the CBI on reinsurance transactions and a
  Europe-wide trend towards a wider variety of reinsurance
  arrangements, the CBI cites some examples of good practice when
  assessing the impact of proposed reinsurance:
  

  • document how the requirements of Articles 208-215 of the
    Commission Delegated Regulations are satisfied before allowing for
    the benefit of a risk-mitigation technique (RMT) in their SCR and
    involve legal experts in this process where necessary;

  
  

  • consider the risk of lack of availability or increased prices
    for RMTs or termination of the RMTs, the impact this would have on
    the SCR coverage ratio, the feasibility of remedial actions and if
    this impacts the overall efficacy of the reinsurance as an
    RMT.




• Forthcoming information requests – the
  CBI is planning to shortly issue a financial sanctions
  questionnaire to some (re)insurers, as well as information requests
  in relation to investment risk, IT risk, claims management (to
  assess the impact of the Personal Injuries Guidelines) and the home
  insurance market.

This article contains a general summary of developments and
is not a complete or definitive statement of the law. Specific
legal advice should be obtained where appropriate.