On 24 June 2022, the Central Bank of Ireland (Central Bank) released its quarterly Insurance Newsletter (Newsletter). The following is an overview of the contents of this quarter’s issue.

Insurance Insights

The Russian Invasion of Ukraine – Key Observations from the Self-Assessment Questionnaire 

1. Self-Assessment Questionnaire & Investment/Insurance Exposure
   
   In April 2022, the Central Bank issued a Self-Assessment Questionnaire (Questionnaire) regarding the Ukrainian crisis to most (re)insurers under its prudential supervision. The purpose of the Questionnaire was to help the Central Bank better monitor its financial and other implications for firms.

   The responses confirmed that the immediate impact and the consequential effects vary from firm to firm depending on the complexity of their business model, their product and geographical footprint. The responses revealed that there is limited investment exposure to Russia, Ukraine and Belarus and that most of the investment exposure comes from unit-linked businesses. Some non-life (re)insurers believe they might see increases in claims on specific lines of business. 

2. Economic and financial market impacts
   
   Responses relating to key economic and financial market consequences focused on the following:
   – Inflation
   – Interest rate increases
   – Economic slowdown
   – Stagflation risks

   Overall, the Questionnaire showed that firms are aware of the impacts of the crisis and how it may affect them financially.

3. Sanctions and operational resilience
   
   In the responses received, no firm indicated any significant issues meeting the sanctions requirements. The Central Bank has noted that the ability of firms to deliver critical services had not been affected by the conflict, although cyber risk was identified as a main threat that may arise. Firms were satisfied that their current business continuity plans included responses for any disruption caused by the conflict.
   
   Publication of Second Annual Report of the NCID (EL & PL Insurance)
   
   On 22 June 2022, the Central Bank published the second annual Employers’ Liability, Public Liability and Commercial Property Insurance Report of the National Claims Information Database (NCID). (Report).  The Report detailed key statistics on Employers’ Liability, Public Liability and Commercial Property Insurance in Ireland.  A core theme of the Report related to an increased number of employers liability and public liability claims being settled through litigation, costing more and taking longer to settle than direct claims or through the PIAB.

Insurance Updates

Recent Stakeholder Engagement

1. On 5 April 2022, Tim O’Hanrahan, Head of Insurance Supervision, addressed Insurance Ireland’s CRO Forum.
2. On 1 June 2022, Cathal Lafferty, Head of Function Insurance Advisory, alongside Brian Balmforth, addressed a Grant Thornton insurance briefing.

   At the events, an update was provided relating to key trends within the sector, areas of supervisory focus and recent/upcoming changes to regulation. Topics for discussion included the Individual Accountability Framework, Product Oversight & Governance, and the impact of the conflict in Ukraine.

3. Lorcan Byrne, Head of Function with the Supervisory Risk Division, provided further details on the recently published Cross Industry Guidance on Outsourcing (Guidance) at the Insurance Ireland – PwC CFO Forum on 26 April 2022.

   The address provided context to the Guidance, which was published on 17 December 2021, and how it would align with a broader focus on operational resilience and key implementation considerations. The Guidance seeks to ensure greater clarity around the Central Bank’s expectations regarding the governance and management of outsourcing risk. Reference was also made to the upcoming implementation of the Digital Operational Resilience Act at EU level, which is likely to be brought into force in 2024-2025.

   The Central Bank expects regulated firms to have effective risk management, governance, and business continuity processes in place relative to outsourcing. The objective of the Guidance is to assist firms in developing their outsourcing risk management frameworks.

   The Central Bank requires timely notification of planned critical or important outsourcing arrangements and requires notice of any material changes to existing critical or important outsourcing arrangements. Each regulated firm must establish and maintain an outsourcing register.

   The requirement for submission of an outsourcing register to the Central Bank is expected from early Q3 2022. It will apply to all firms with a PRISM impact rating of “Medium Low” or above. The notifications must include the information outlined in paragraph 54 of the EBA Guidelines on outsourcing.

4. Domhnall Cullinan, Director of Insurance, was a panellist at the National Association of Insurance Commissioners (NAIC) International Forum on 12 May 2022.

   This panel discussion was entitled ” Big Data and Cyber Security – Ensuring Technology and Innovation Remain an Asset, not a Liability.”

5. The Central Bank Governor, Gabriel Makhlouf, delivered the keynote speech at the Annual Insurance Ireland Industry Lunch on 16 June 2022.

   Governor Makhlouf noted the important role of Insurance Ireland in promoting the Irish insurance sector, and set out several current and future challenges for the Irish insurance industry. The full speech is available here and a summary of the speech provided by the William Fry insurance team is available here.

Returns Transformation

In the past few months, the CBI has informed insurance undertakings of several additional services available on the Central Bank’s IT Portal. These services will be added to throughout 2022 and 2023, with the first set of services introduced on the week commencing 27 June 2022. The new services include a “Single Sign-On” allowing users to utilize Online Reporting (ONR) services through the portal, as well as “Permission Management Services” for administrators.

Guidance on the Portal is available here. 

EU & International Updates

Revised EIOPA Guidelines on Technical Provisions & Contract Boundaries

On 21 April 2022, EIOPA published final reports on the revisions to the Guidelines on the valuation of Technical Provisions (TPs) and Contract Boundaries (CBs). This followed on from EIOPA’s 2020 review of Solvency II. The Central Bank recommends that the revisions to these Guidelines should be taken into account by the relevant firms as soon as possible and no later than 1 January 2023. 

Publication of EIOPA Annual Report 2021

On 14 June 2022 EIOPA published its 2021 Annual Report, which lays out EIOPA’s activities and achievements throughout the past year.

Publication of 2021 IAIS Year in Review

The “2021 Year in Review” sets out the key achievements and progress made by the IAIS over the preceding year. Particular focus is placed on IAIS’ work relating to climate change. The publication outlines the key upcoming projects in its”2022-2023 Roadmap” and how this will align with IAIS’ high-level goals going further. 

Forward Planner/Upcoming Dates

Upcoming Stakeholder Engagement

• Association of Bermuda Insurers and Reinsurers – 15th Annual Dialogue: 8-9 September
• Erin Research Event: 15 September
• Financial Services Ireland Conference: 6 October

Upcoming Surveys/Information Requests

• Outsourcing Register Submission: Early Q3 2022
• Operational Resilience Maturity Assessment: Early Q3 2022
• Digitalisation Survey: Consultation – Early Q3 2022
• Survey Issues – Early Q4 2022

Contributed by Joan McCarthy & Frank Hanly