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Since the publication of our insight “ Central Bank of Ireland – Thematic
Inspection of Product Oversight &
Governance”on 30 June 2023, the European
Insurance and Occupational Pensions Authority
(“EIOPA“) has published a peer review on product
oversight and governance (“POG“) which
focuses on how national competent authorities
(“NCAs) in the European Economic Area are
supervising the application of POG requirements by insurance
manufacturers.
The report was published on 20 July 2023 and found that most
NCAs had adapted their internal processes to include the
supervision of POG requirements introduced by the Insurance
Distribution Directive (“IDD“) and the
relevant Commission Delegated Regulation. The report also noted
that some NCAs were still building their supervisory POG framework,
and there remains significant differences regarding the level of
maturity of POG supervision. In summary, 6 NCAs broadly met
expectations, 2 met most expectations, 4 met some expectations and
18 met few expectations.
Ireland
The report found that Ireland fell into the group of
“NCAs broadly meeting expectations” with only
one recommended action. EIOPA recommended that Ireland take action
within the area of ‘Setting and communicating supervisory
expectations’. They recommended that the Central Bank of
Ireland (“Central Bank“) formulate and
communicate in a formal manner or via supervisory dialogues, a
comprehensive set of supervisory expectations covering all the
elements of POG requirements. They also recommended that the
Central Bank follow up on these expectations by challenging the
effectiveness of POG arrangements by supervised entities based on
these expectations.
Implications for Ireland
In its report, EIOPA noted that some NCAs, including Ireland,
“are planning to set and communicate to the market clearer
expectations on POG through publications and supervisory dialogue
with insurance undertakings”. The report goes on to state
that these communications fell outside the reference period of the
peer review but would be considered during the follow-up phase.
Clients will note from the above mentioned Insight, that the
Central Bank in its’ quarterly Insurance
Newsletter has recently detailed good practices which
insurers should consider embedding into their own POG arrangements.
These good practices were derived from observations made by the
Central Bank during its thematic inspection of POG requirements. We
understand that this is the communication which fell outside the
reference period of the report. In accordance with the report,
these steps will be monitored and assessed by EIOPA during the
follow up phase of the peer review. It is unclear as to whether
this action will be enough to address EIOPA’s recommendation or
whether the Central Bank will deem a more comprehensive formal
communication on the matter, such as a Dear CEO Letter, to be
warranted. We will update clients should developments occur. In the
meantime, firms should carefully consider the expectations of the
Central Bank set out in the Insurance Newsletter and take steps to
ensure that their POG framework is aligned with the stated
regulatory expectations.
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.
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