There is an emergent divergence of opinion between trade body Insurance Europe and regulators. Will calls for further regulation create more substantial fissures?
Insurance Europe, a trade body comprised of insurance associations representing approximately 95% of European premium insurance income, recently issued a press release reaffirming its stance on EU proposals for harmonising recovery and resolution frameworks for insurers. Insurance Europe argues that proposals for substantially changing recovery and resolution rules for insurers are unnecessary. Rather, it asserts, current safeguards provided under Solvency II (a European framework governing capital adequacy and risk reduction for insurers) are sufficient. Insurance Europe’s announcement was borne out of a discussion paper from the European Insurance and Occupational Pensions Authority (“EIOPA”), in which it considered harmonising national recovery and resolution frameworks for insurers in the EU. EIOPA suggested “minimised harmonisation” whereby EU member states would be enabled to implement new regulatory measures to their respective insurance markets. Click here for more details of the EIOPA proposals and Insurance Europe’s response.
The Hong Kong Financial Services Development Council, an advisory body to the government, has recently released a report on the Hong Kong insurance sector. Its key recommendations are:
- Boosting the Hong Kong reinsurance market, including by negotiating preferential treatment for Hong Kong reinsurers under C-ROSS, China’s risk-based capital regime, and by extending tax incentives for offshore reinsurance to life reinsurance and to direct insurers conducting reinsurance business.
- Turning Hong Kong into a leading marine insurance market, including by negotiating preferential treatment for Hong Kong insurers under C-ROSS, creating tax incentives for marine insurance and marketing Hong Kong as a marine insurance hub.
- Establishing Hong Kong as a leading domicile for captives through regulatory guidance on captive management and operations, proactive support by the insurance regulator and enhanced marketing. The development of the Hong Kong captive industry has been a focus for some time. Significant regulatory and tax concessions for captives have been in place for a number of years, and in 2012 the Chinese central government encouraged Mainland companies to set up their captive insurers in Hong Kong. However, despite those measures, only three captives have been established in Hong Kong to date. As the report correctly identifies, a critical mass will typically have to be reached in order for a jurisdiction to become a hub for captives. It is doubtful whether that critical mass can be achieved in Hong Kong without the Chinese government taking active steps to promote Hong Kong as a captive hub.
It has been announced that the new Independent Insurance Authority for Hong Kong (“IIA“) will assume its functions on 26 June 2017 (the “Commencement Date“), replacing the Office of the Commissioner of Insurance.
From the Commencement Date, the appointment of “key persons” (such as officers responsible for risk management, compliance, financial control, internal audit and the actuarial function of authorised insurers) will be subject to approval by the IIA on the basis of “fit and proper” criteria. The same requirement will apply to new directors of Hong Kong incorporated insurers. The existing approval regime only applies to certain controllers, chief executives and managing directors of authorised insurers. Continue Reading
On 9 August 2016, the China Insurance Regulatory Commission (“CIRC“) issued the Notice on Matters Relating to Collateral Provided by Offshore Reinsurers (Draft) (the “Draft Notice“) for public consultation. On 13 March 2017, CIRC released on its official website the final version of the notice (the “Final Version“), which has been effective since 23 February 2017. The Final Version sets out the requirements that collateral provided by offshore reinsurers must meet in order for a lower risk factor to be applied by the ceding company to the reinsurance under China’s risk-based solvency regime, C-ROSS. The key features summarized in our previous blog post (please see full text here) remain the same in the Final Version, except for the following points: Continue Reading
Tuesday 23 May 2017 17.00 – 17.50BST/18.00 – 18.50 CEST/12.00 – 12.50 EDT
What can we expect from M&A in the insurance industry in 2017? Will businesses pause in pursuit of their M&A plans as a consequence of the forthcoming UK elections, Article 50 negotiations and Trump’s agenda amongst other factors or will M&A activity continue?
Members of our global insurance team in London and New York will host this webinar together with representatives from KPMG, to discuss current trends and new developments in M&A in the insurance industry.
Click here for further details and to register.
From today, insurers in the UK will be required to pay valid insurance claims within a reasonable time and may be hit with damages claims from insureds, if they fail to do so.
This change has been brought about by the Enterprise Act 2016, which inserts a new section 13A into the Insurance Act 2015 (the “Act“). The effect of this change is that it will be an implied term of every contract of insurance (both consumer and business) that the insurer shall pay valid claims within a “reasonable time”. Breach of this term will entitle an insured to damages for late payment, in addition to the proceeds of the claim itself plus interest. Continue Reading
On 29 December 2016, the China Insurance Regulatory Commission (“CIRC“) commenced public consultation on the amended Administrative Measures for Equities of Insurance Companies (Draft for comments) (the “Draft Measures“), setting out a new regulatory regime for investment in Chinese insurance companies.
Lowered Maximum Shareholding Percentage
The market sees the Draft Measures as CIRC’s reaction to the series of acquisitions of major listed insurance companies in the secondary market since 2015, which are widely reported in the media and viewed critically by the regulator in terms of the identity of the purchasers (being often from outside the industry) and their intention for such acquisitions (suspected as using the listed insurance company as their own financing platform). In light of this, CIRC has changed the limit on the shareholding by a single shareholder in a Chinese insurance company from the current 51% (for those having satisfied certain requirements, including acting as shareholders of an insurance company for at least three years and being approved by CIRC) to one-third, subject to certain exceptions. The limit on the maximum shareholding percentage continues to apply to the aggregated equity interest held by related parties. Continue Reading
The FCA has outlined the current trends, risks and its overall assessment of the General Insurance sector in its 2017 Sector Views, published last week. Some of the key points are highlighted below:
Technological Advances as Drivers of Change
The General Insurance sector has been affected by technological advances which have given firms access to an unprecedented amount of new consumer data. In retail, car-telematics are giving insurers sophisticated data on their customers’ driving behaviour and risk profiles. In the protection market, insurers can use Big Data to predict life expectancy and income security with more accuracy. This is likely to have an impact on premiums for customers, introducing more marked price differences based on the particular risk a customer presents. In addition, some insurers have increased their product range as they have been able to conduct more sophisticated analytical modelling, capturing risks that have previously been “unknowable” and therefore allowing for more accurate pricing.
It is the FCA’s view that price comparison websites have become central to the distribution of core products, especially in retail insurance. Insurers now find it harder to reach customers in the motor and home insurance markets without paying to list on price comparison websites. Continue Reading
In its recently published 2017/2018 Business Plan the FCA outlines its priorities for the general insurance sector over the coming year and beyond.
In general, the Business Plan identifies a shift in focus towards market structures, incentives and distribution and away from issues directly affecting retail/SME consumers (though the FCA will continue to monitor and review its previous work in this area):
“The general insurance and protection (GI&P) sector protects individuals and businesses against the cost of uncertain and often unpredictable events. Without the protection of insurance, many social and economic activities could not take place. It is vital that this market, including the wholesale market underpinning it, works well.” Continue Reading
The Policing and Crime Act 2017 (the “2017 Act“) has introduced measures to strengthen the effectiveness of the UK’s financial sanctions regime. The delay in the implementation of UN sanctions as a result of EU processes is one strand that has been addressed and will be discussed in greater detail below. The 2017 Act also includes provisions targeted at strengthening penalties available to the Office of Financial Sanctions Implementation (“OFSI“) – our blog post on this can be found here. Continue Reading