CENTRAL BANK PUBLISHES CONSULTATION ON THE REVIEW OF THE CORPORATE GOVERNANCE CODE FOR CREDIT INSTITUTIONS AND INSURANCE UNDERTAKINGS

On 1 August 2013, the Central Bank published a consultation paper on the Review of the Corporate Governance Code for Credit Institutions and Insurance Undertakings (CP69). It contains a summary of the most significant proposed amendments as follows: (1) Risk Committees: an amendment to require that the risk committee be composed of a majority of non-executive directors, with a non-executive director as Chairman; (2) Chief Risk Officer: a new requirement for all institutions to appoint a Chief Risk Officer; (3) Board Meetings: (i) an invitation to comment on the number of board meetings which High Impact Institutions1 must hold per year; and (ii) an amendment to the requirement that all non-High Impact Institutions hold their four board meetings in separate calendar quarters so they must now hold one meeting per half year with the other two meetings scheduled as the board deems appropriate; (4) Chairman: a proposal to permit a Chairman of subsidiaries of groups of Medium-High, Medium-Low or Low- Impact Institutions to hold more than one Chairman position within the same group of companies; (5) Chief Executive Officer: a proposal to allow a CEO of a Medium-Low or Low-Impact Institution to hold up to two additional CEO positions in credit institutions or insurance undertakings which are designated as either Medium-Low or Low-Impact Institutions; (6) Committees of the Board: a proposal to require an individual who is the Chairman of an audit committee to be a member of the risk committee and vice versa provided that, in respect of High- Impact Institutions, there would be a prohibition on the Chairman of the risk committee and audit committee being the same individual simultaneously; (7) Annual Compliance Statement: a proposal to allow institutions file annual compliance statements in accordance with their financial reporting period (if this differs from the calendar year); and (8) Board Responsibilities: a proposal that five particular board responsibilities are set out in a more specific manner.

In addition, the Central Bank is seeking feedback in respect of (1) whether specific diversity requirements regarding gender ratios on boards should be introduced; and (2) whether the current limitations on the number of directorships one person can hold are appropriate. The closing date for submissions is 1 October 2013 and the Central Bank anticipates a revised Corporate Governance Code will be published in December 2013, allowing a reasonable time period for institutions to comply with the revisions.

A link to CP69 is here

INSURANCE COMPRISES 50% OF COMPLAINTS RECEIVED BY FINANCIAL SERVICES OMBUDSMAN

On 21 August 2013, the Financial Services Ombudsman (the FSO) published his Office's Bi-Annual Review 2013 (the Review). The Review provides detail on the complaints received and handled by the FSO for the period 1 January - 30 June 2013. The Review analyses the trends of various complaints and sets out a summary of the number of complaints received. It outlines the subject matter of complaints for the banking, investment and insurance sectors, and examines the findings issued by the FSO.

Notably, insurance comprises 50% of all complaints received by the FSO which is broadly consistent with outturns of previous periods. The Review states that insurance complaints have increased by 7% on the last 2 quarters of 2012. Payment Protection Insurance (PPI) complaints increased by 150% over the same period last year and account for 44 % of all insurance complaints so far in 2013. The FSO attributes this increase, in part, to the Central Bank's review into the sale of PPI and media coverage of the issue. In terms of the 'complaint-type', mis-selling was responsible for 48% of insurance complaints. In its accompanying press release, the FSO noted that travel, household and motor insurance complaints mainly related to repudiations of claim and settlement amounts. This, the FSO states, is reflective of the need for the insurance industry to do more in terms of informing consumers as to insurance products and relevant conditions at point of sale.

The FSO also signalled that the changes to the Central Bank Act 1942 due to come into force on 1 September 2013 pursuant to the Central Bank (Supervision and Enforcement) Act 2013 will allow the FSO to publish complaint data of individual financial institutions. Please see the note below on the Central Bank (Supervision and Enforcement) Act 2013 and accompanying link to the Arthur Cox Briefing.

A link to the Review is here

A link to the press release is here

CENTRAL BANK (SUPERVISION AND ENFORCEMENT) ACT 2013 COMES INTO FORCE

On 1 August 2013, all sections (other than Section 72) of the Central Bank (Supervision and Enforcement) Act 2013 were commenced. Section 72, which provides the FSO with the power to 'name and shame' financial institutions, will come into effect on 1 September 2013.

A link to the Arthur Cox Briefing on the Central Bank (Supervision and Enforcement) Act 2013 is here

IN EUROPEAN AND INTERNATIONAL NEWS...

THE INSURANCE AND REINSURANCE STAKEHOLDERS GROUP OF EIOPA PUBLISHES "POSITION PAPER" ON INSURANCE MEDIATION DIRECTIVE 2

On 1 August 2013, the Insurance and Reinsurance Stakeholder Group (IRSG) of the European Insurance and Occupational Pensions Authority (EIOPA) published its Position Paper on the proposed Insurance Mediation Directive 2 (IMD2). In the Position Paper, the IRSG outlines its support for a number of proposed amendments to the Insurance Mediation Directive (IMD). The IRSG also sets out recommendations for inclusion in IMD2.

IMD2 seeks to build upon the IMD by increasing policyholder protection and enhancing the level of information provided to consumers of insurance products. Among other objectives, IMD2 aims to simplify the procedure for cross-border selling of insurance products throughout the EU.

Overall the IRSG supports the aims of IMD2, particularly the improvement of the quality of information provided to consumers of insurance products and the enhancement of consumer protection in the insurance sector. The IRSG agrees that Member States should be allowed to impose stricter requirements and believes the minimum harmonisation approach of IMD2 is correct. The IRSG recommends the introduction of general duties of intermediaries and insurance undertakings to their customers through the use of concepts already applied by many national legislators e.g. good faith, fairness.

A link to the Position Paper can be found here

EBA, EIOPA AND ESMA PUBLISH RTS ON THE CONSISTENT APPLICATION OF CALCULATION METHODS UNDER THE FINANCIAL CONGLOMERATES DIRECTIVE

On 29 July 2013, the Joint Committee comprising the three European Supervisory Authorities (the European Banking Authority, EIOPA and the European Security and Markets Authority) released its draft regulatory technical standards (RTS) relating to the consistent application of methods of calculation described in the Financial Conglomerates Directive 2002/87/EC regarding the assessment of the financial situation of credit institutions, insurance undertakings and investment firms. The RTS define calculation methods to be used. The underlying principles of the RTS are to eliminate multiple gearing and intra-group creation of own funds, transferability and availability of own funds and to cover deficit at financial conglomerate level having regard to definition of cross-sector capital.

A link to the RTS is here

JOINT FORUM PUBLISHES CONSULTATION PAPER ON LONGEVITY RISK TRANSFER MARKETS AND POINT OF SALE DISCLOSURE

On 15 August 2013, the Joint Forum (which is comprised of the Basel Committee on Banking Supervision, the International Organisation of Securities Commissions, and the International Association of Insurance Supervisors) (the Joint Forum) published two Consultation Papers (CPs) on Longevity Risk Transfer Markets and Point of Sale Disclosures. Comments in respect of each CP must be submitted by 18 October 2013.

The first CP relates to the growth drivers and impediments, market structure and risks affecting the longevity risk transfer markets. The Joint Forum has observed that due to the aging population of many countries, longevity risks (i.e. the risk of paying out on pensions and annuities longer than the insurer anticipated) has become a serious issue with corresponding social policy challenges. The paper focuses on the risks relating to the emerging longevity risk transfer markets with a view to helping policy makers and supervisors aware of the relevant risks as these longevity risk transfer markets continue to grow.

The second CP relates to point of sale (POS) disclosure in the insurance, banking and securities sectors. The Joint Forum has indicated that there are different regulatory approaches to POS disclosure for investment and savings products in the insurance, banking and securities sectors. The paper examines the issue of whether the regulatory approaches to POS disclosure should be harmonised across the various sectors. The Joint Forum sets out a number of recommendations, including guidance as to what information could be included in the POS disclosure document, in order to assist (among other things) policy makers and supervisors to revise their POS disclosure requirements.

A link to the CP on Longevity Risk Transfer Markets is here

A link to the CP on POS disclosure is here

UPDATE ON OMNIBUS II

On 6 August 2013, EIOPA announced that a meeting of the Council Working Party on Financial Services (Attached - OMNIBUS II) will take place on 3 September 2013. Among the items for discussion is the state of play of the negotiations with the European Parliament as regards OMNIBUS II, the European Commission's proposal for a Directive amending Directives 2003/71/ EC (the Prospectus Directive) and 2009/138/EC (Solvency II)).

A link to the Press Release is here

EIOPA ADOPTS THE IRSG'S OPINION ON EIOPA'S PROPOSAL FOR GUIDELINES ON COMPLAINTS-HANDLING BY INSURANCE INTERMEDIARIES AND DRAFT REPORT ON BEST PRACTICES BY INSURANCE INTERMEDIARIES IN HANDLING COMPLAINTS

On 6 August 2013, EIOPA adopted the IRSG's Opinion on EIOPA's Proposal for Guidelines on Complaints-Handling by Insurance Intermediaries and Draft Report on Best Practices by Insurance Intermediaries in Handling Complaints (the Opinion). The IRSG noted the following in the Opinion: (1) with respect to the scope of the draft guidelines it agreed with EIOPA that it should cover and promote internal complaints handling procedures for insurance intermediaries and endorsed EIOPA's opinion regarding the distinct nature of the EU insurance intermediary market; (2) the guidelines on complaints handling should be applied in a proportionate manner relative to the size of the insurance intermediaries and a proportionality provision should be included in the guidelines; and (3) the draft guidelines should take the proposed IMD2 into account.

A link to the Opinion is here

INSURANCE EUROPE RESPONDS TO THE EUROPEAN COMMISSION'S CONSULTATION ON THE REVIEW OF THE EUROPEAN SYSTEM OF FINANCIAL SUPERVISION

On 2 August 2013, Insurance Europe published its response to the European Commission's Consultation on the Review of the European System of Financial Supervision (the Consultation).

The Consultation focused on the structure of the European System of Financial Supervisors (the ESFS), the effectiveness and efficiency of the three European Supervisory Authorities bodies (the ESAs) in accomplishing their tasks, and the mandate of the European Systemic Risk Board (the ESRB).

In its detailed response, Insurance Europe comments that the ESFS has served its purpose by initiating the improvement of European supervision and maintaining confidence in the EU financial system. While only in place since 2011, Insurance Europe does not feel the current structure of the ESFS needs to be reviewed although it would welcome clarity regarding some of the provisions by which the ESAs fulfil their tasks, in the interests of transparency, and strongly supports the need to maintain EIOPA as a separate ESA. It would welcome the involvement of EIOPA in cross-sectoral supervisory discussions. Insurance Europe's response emphasises the need for EIOPA to cooperate closely with the National Supervisory Authorities in each Member State to ensure effective supervision and consistency regarding consumer protection.

Insurance Europe cautions against the increase in ESAs' regulatory powers and any potential use of 'guidelines' to sidestep the powers that would normally fall within the remit of the executive and legislature on the basis that this could blur the line between regulatory and supervisory boundaries.

Insurance Europe also supports the mandate for the ESRB, but calls for the inclusion of the sector specific experience of the ESAs in the ESRB's decision making process. In terms of the composition of the ESRB's General Board, Insurance Europe contends that stronger insurance representation is needed, given the valuable perspective the insurance sector can offer on any systemic risk debate.

A link to Insurance Europe's response can be found here

IN OTHER NEWS...

CENTRAL BANK APPOINTS NEW DEPUTY GOVERNOR, FINANCIAL REGULATION

On 21 August 2013, the Central Bank announced that it has appointed Cyril Roux as Deputy Governor, Financial Regulation. Mr Roux currently holds the position of First Deputy Secretary General of the French prudential supervisory authority for banks and insurance companies. From 1 October 2013 onwards, Mr Roux, in his capacity as Deputy Governor Financial Regulation, will be responsible for all regulatory activities at the Central Bank.

A link to the Central Bank's press release is here

IRISH BROKER INTERVIEW WITH PHILIP SMITH, RECENTLY APPOINTED PRESIDENT OF INSURANCE IRELAND

This month, Irish Broker interviewed recently appointed President of Insurance Ireland, Philip Smith. Mr Smith outlines the representative body's primary strategic goals and discusses priority items for the year ahead.

A link to the interview is here

Footnotes

1. CP69 proposes that "High Impact", "Medium- High", "Medium-Low" and "Low-Impact" be used as the categorisations to align the terminology with the terminology used as part of PRISM.

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.