Background

The European Union (Insurance and Reinsurance) (Amendment) Regulations 2021 (2021 Regulations) will come into operation on 30 June 2021, giving effect to Directive (EU) 2019/2177 of the European Parliament and of the Council of 18 December 2019 (2019 Directive).

The 2019 Directive amends the Solvency II Directive (2009/138/EC), the MiFID II Directive (2014/65/EU) and the 4th Anti-Money Laundering Directive (2015/849/EU).

In view of increased cross-border insurance activities, the 2019 Directive strengthens information exchange and cooperation between national supervisory authorities (NSAs) and the European Insurance and Occupational Pensions Authority (EIOPA) in the case of a significant cross-border insurance activity or a crisis situation.

The 2019 Directive also:

• Provides details of the conditions for setting up cooperation platforms.
• Introduces additional rights and obligations on the Central Bank of Ireland (CBI) regarding the internal models of (re)insurers it supervises. 

Key Change: New Notification Requirements

New notification requirements have been brought in by the 2021 Regulations. The CBI will be required to notify (1) EIOPA and (2) the NSA of the relevant host Member State of:

• The CBI’s intention to authorise a (re)insurer whose scheme of operations indicates that a part of its activities will be cross-border (i.e. freedom to provide services (FOS) or the freedom of establishment in another Member State (FOE)), and that those activities are likely to be of relevance to the host Member State’s market.
• Where the CBI identifies deteriorating financial conditions or other emerging risks posed by the (re)insurer carrying out activities which are based on the FOS or FOE and may have a cross-border effect.
• Where the CBI has serious and reasoned concerns with regard to consumer protection.

The notifications as outlined above must be sufficiently detailed to allow a proper assessment. 

Where the CBI makes such a notification, or a NSA of another Member State notifies the CBI in accordance with the law of that Member State giving effect to the 2019 Directive, the CBI and that supervisory authority may refer the matter concerned to EIOPA and request EIOPA’s assistance where no bilateral solution can be found.

Key Change: Collaboration Platforms

Under the 2021 Regulations, the CBI may request EIOPA to set up and coordinate a collaboration platform to strengthen the exchange of information and to enhance collaboration between relevant supervisory authorities.  A request can be made where a (re)insurer carries out, or intends to carry out, FOS or FOE activities, and where:

• Such activities are of relevance with respect to the host Member State’s market; 
• A notification has been made by the supervisory authority of the home Member State in accordance with the 2019 Directive of deteriorating financial conditions or other emerging risks; or
• The matter has been referred to EIOPA under Article 152a(2) of the 2019 Directive, in circumstances where a home member state has notified EIOPA that it has identified deteriorating financial conditions or other emerging risks posed by a (re)insurance undertaking carrying out activities which are based on FOS or FOE and which may have a cross-border effect.

EIOPA may also set up a collaboration platform, under the 2019 Directive, in the case of justified concerns about negative effects on policy holders. 

Internal Models

Key Change: General Provisions for Approval of Full and Partial Internal Models

The 2021 Regulations require the CBI to inform EIOPA, in accordance with Regulation (EU) No 1094/2010 (2010 EIOPA Regulations), of any applications to use or change an internal model.

The CBI may request EIOPA to provide technical assistance to it, pursuant to the 2010 EIOPA Regulations, with respect to a CBI decision on a (re)insurer’s application to use or change an internal model.

Key Change: Group Internal Model

The 2021 Regulations also give EIOPA a greater role in the area of group internal model applications. The CBI must notify EIOPA in the case of an application for permission to calculate the consolidated group solvency capital requirements (SCR), as well as the SCR of individual (re)insurers in the group, on the basis of an internal model. 

Where the CBI is the group supervisor, it is required to inform the other members of the college of supervisors, including EIOPA, of the receipt of such an application. It is also required to forward the complete application, including the documentation submitted by the undertaking, to those members, without delay.

Where the CBI is a member of the college of supervisors of a group in respect of which such an application has been made, the CBI may request EIOPA to provide technical assistance, pursuant to the 2010 EIOPA Regulations, to the CBI, with respect to the decision on the application.

Conclusion

The aim of the 2021 Regulations is to encourage information exchange and cooperation between NSAs and EIOPA in relation to certain sensitive areas. The extent to which these changes, once implemented, will impact communications between home and host NSAs and the ways in which they collaborate and cooperate with one another, remains to be seen. The 2021 Regulations (see here) will come into operation on 30 June 2021.

Our understanding is that the CBI does not currently anticipate materially amending the authorisation checklists for (re)insurance applications in light of the changes introduced by the 2021 Regulations.

Contributed by Cliodhna Hand