Latest Updates on Insurance Supervision: Solvency II and IDD
Explore new advancements in insurance supervision focusing on Solvency II and the Insurance Distribution Directive (IDD). Delve into topics like the proportionality principle, differences between banking and insurance supervision, and the scope and structure of Solvency II and IDD. Understand the types of requirements under Solvency II and IDD, including licensing, quantitative and qualitative pillars, risk-based approaches, and details on IDD concerning intermediaries, conflicts of interest, and product governance. Stay informed about the evolving landscape of insurance regulations and their impact on the industry.
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Presentation Transcript
New Developments in Insurance Supervision Solvency II and Insurance Distribution Directive (IDD) Steffi Illegems PhD Candidate Antwerp Liability Law and Insurance Chair Antwerp, 26 April 2018
Overview I. II. III. Proportionality principle IV. In the shadow of banking supervision V. Similar objectives, yet conflicting results? VI. Review v. implementation VII. Food for thought Scope and structure Types of requirements 2
I. Scope and structure A. Scope Solvency II IDD Directive 2009/138/EC on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) Directive 2016/97 on insurance distribution (IDD) Applicable since 01/01/2016 Applicable from 01/10/2018 Prudential supervision Conduct of business supervision (Re)insurance undertakings established in a Member State Exclusions (Re)insurance distributors established in a Member State Exclusions Maximum harmonization Minimum harmonization 3
B. Structure Lamfalussy Framework Solvency II IDD Level 1: Directive 2009/138/EC => national acts Level 1: Directive 2016/97 => national acts Level 2: Delegated Regulation 2015/35, many other delegated and implementing regulations Level 2: 1 implementing regulation on IPID, 2 delegated regulations on POG and IBIPS Level 2.5: expansive set of EIOPA implementing technical standards Level 2.5: Draft EIOPA Implementing Technical Standards on IPID Level 3: 29(!) sets of EIOPA guidelines => comply or explain Level 3: currently 1 set of guidelines (on IBIPS) => comply or explain (Level 4: Commission measures against national legislators) (Level 4: Commission measures against national legislators) 4
II. Types of requirements Solvency II: Licensing of undertakings 3 pillars: Quantitative: capital requirements, valuation, technical provisions, own funds, investments Qualitative: governance, risk management, key functions, internal control, ORSA, outsourcing, fit & proper Reporting to the supervisory authority, disclosure to the public Risk-based Proportionate to the nature, scale and complexity of the risk profile 5
IDD: Registration and status of intermediaries Insurance Product Information Document (IPID) Conflicts of interest Advice, demands and needs Cross-selling Product oversight and governance (POG) Insurance-Based Investment Products (IBIPs): Conflicts of interest, information, suitability and appropriateness, inducements Proportionate to the nature, scale and compexity of the risks inherent in the distributor s business 6
III. Proportionality principle Great potential Risk profile For requirements & supervisory actions Not non-application, but adaptation National specificities But tensions and inconsistencies? Size is (not) a criterion Maximum harmonization Level 1 basis 7
IV. In the shadow of banking supervision Solvency II v. CRD IV/CRR: 3 pillars Risk-based capital requirements Own funds in tiers Independent control functions/key functions (BE) IDD v. MiFID II: Key information document (IPID) Execution only Suitability & appropriateness POG 8
V. Similar objectives, yet conflicting results? Solvency II IDD Ultimate goal = policyholder protection Solid insurance undertakings Protection against unfair practices/mis- selling Financial stability, fair and stable markets Transparency, adequate information Conflicting results? Life insurance products with or without guarantees/whether or not unit-linked In a low interest rate environment 9
VI. Review v. implementation Solvency II: Review stage Delegated Regulation 2015/35 SCR review 2018 Technical advice by EIOPA Actual review by Commission Solvency II Directive Review 2021 IDD: Implementation stage Directive 2018/411 Quick Fix Transposition date: July 1st, 2018 Application date: October 1st, 2018 National transpositions + Levels 2 and 3 to be completed 10
VII. Food for thought Technical aspects: More insurance-tailored approach needed? How to deal with national specificities? Proportionality principle New developments: Brexit FinTech, InsurTech International Capital Standard, IFRS 11
Thank you steffi.illegems@uantwerpen.be
