Insurance & Asset Management update – September 2021
  • Saturday, 11 September 2021

Insurance & Asset Management update – September 2021

Insurance

EIOPA is seeking consult regarding supervision of run-off undertakings

The European Insurance and Occupational Pensions Authority (EIOPA) welcomes comments on the consultation paper on the Supervisory Statement on supervision of run-off undertakings. When properly and fairly managed, the run-off business model can bring benefits such as freeing up capital for more profitable business or facilitate an orderly exit from the market. At the same time, the supervision of run-off portfolios is challenging due to the specific risk profile and the lack of specific regulation in the Solvency II framework. Recently, the number of run-off businesses increased and attracted interest from amongst others private equity. As the interest of policy holders is in the focus, EIOPA considers, for example, asking the acquirer of such a portfolio to make additional commitments or provide collateral. The consultation is open until 17 October 2021.

Supervisory statement on ORSA in the context of COVID-19

EIOPA has published a Supervisory Statement on the Own Risk and Solvency Assessment (ORSA) in the context of the COVID-19 pandemic. The aim is to promote supervisory convergence and provide a guide for supervisory expectations under the current situation. The impact of the proposed supervisory convergence measures is analysed. For example, the timing of regular and ad-hoc ORSA is dependent on the materiality of the risk profile change given a crisis. Furthermore, the ORSA should reflect conditions observed in the moment of the pandemic on, for instance, capital markets and claims development. Though, the sustainability of an entities business model must also be evaluated if such a pandemic or similar events occur again.

Please contact Lennard Beijering or Nicolas Ziob for more information regarding the supervision of run-off undertakings or ORSA.

Asset Management

AFM raises concerns on management outsourcing risks in asset management sector

The Dutch Authority for the Financial Markets (AFM) has raised some concerns regarding the management of outsourcing risks in the asset management sector. The main concerns of the AFM are the following:

  • Although in most cases outsourcing policies are available, implementation of these policies is often lacking
  • Due to the increasing number of activities being outsourced, more focus on outsourcing management is required
  • As a result of outsourcing, a larger part of activities of entities under supervision are being performed outside of the Netherlands, which complicates the supervision of these activities

Please contact Mark van Maaren or Bas van Oers for more information on outsourcing risks in the asset management sector.

Sustainability

IOSCO consults on ESG ratings and data providers

The International Organization of Securities Commissions (IOSCO) is asking for feedback on a set of recommendations regarding environmental, social and governance (ESG) ratings and data providers. IOSCO conducted an exercise showing, amongst other things, a lack of transparency about the methodologies and data products regarding ESG ratings. Uneven coverage of products across industries and locations could lead to gaps and inconsistencies when applying these to investment strategies or other business lines. The market for ESG ratings has grown considerably over the past few years. However, according to Ashely Adler, IOSCO chair, most jurisdictions do not have regulatory frameworks which explicitly cover the providers of these rating products. IOSCO’s recommendations attempt to address the challenges faced by data providers as well as by the users of ESG ratings.

Application date SFDR delayed by six months to July 2022

The European Union has deferred the application dates of the second phase of the Sustainability Finance Disclosure Regulation (SFDR), which requires asset managers to disclose how environmental issues are taken into account in investments, by six months. The deferment is deemed required to ensure a smooth implementation of the regulations, given the length and technical detail of the involved regulatory technical standards. Moreover, additional technical standards are still being prepared by EIOPA, the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA).

Please contact Lennard Beijering or Nicolas Ziob for more information regarding ESG ratings or SFDR.