Insurance regulation newsletter - Issue 6

Over the past couple of years, insurers have grappled with multiple new regulatory guidance papers and requirements, all while recovering from the Covid-19 pandemic and abnormal macroeconomic conditions. 2023 saw several significant legislative developments at a European level with Solvency II reform, the Insurance Recovery and Resolution Directive, and the Artificial Intelligence Act all now having advanced through the trilogue process. This all comes against the backdrop of monumental advancements in the use of AI in the insurance value-chain while consumer preferences continue to evolve in respect of both digitalised services offerings and sustainable finance.

In response to the evolving environment, the CBI have been keenly focusing on governance and risk management practices during the second-half of 2023. Recent regulatory publications have provided further insights on reserving practices, ORSA best practice, reinsurance, product governance, and digitisation. Meanwhile, the first pillars of the Individual Accountability Framework have been implemented and taken effect, while SEAR regulations shall apply from July 2024.

Similar themes are being echoed from EIOPA with focus applied on value-for-money, third-country governance, sustainable finance, and prudential treatment of climate risks. 

Despite the demands on multiple fronts, most Irish insurers have demonstrated that they continue to remain financially strong with the most recent publication of SFCR data showing that average SCR coverage ratios stood at 186 per cent at 2022 year-end. Challenges lie ahead however in ensuring business strategies remain competitive and efficient in increasingly demanding regulatory, macroeconomic, and technological landscapes. This will be a critical challenge for the industry in 2024, no doubt.