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EY Malta is delighted to share another quarterly Insurance Industry Regulatory Compliance Newsletters. In this newsletter, we will be providing a snapshot of publications, updates to legislation and consultations issued in the second quarter of 2023 around the insurance regulatory compliance framework.
What’s inside this newsletter
- First joint mystery shopping exercise across multiple EU Member States
- The European Supervisory Authorities launch public consultation on the first batch of Digital Operational Resilience Act policy products
- A common understanding of greenwashing and warning on risks
- Amendments to References to the Conduct of Business Rulebook
- New Application for the Incorporation of Cells of Protected Cell Companies, Incorporated Cell Companies or Reinsurance Special Purpose Vehicle Securitisation Cell Companies
- Macro and market risks as top concern for insurers
- Update to the Nature and Art of Financial Supervision – The Demands and Needs Assessment
- The Reporting Requirements under IFRS17 for Insurance Contracts
First joint mystery shopping exercise across multiple EU Member States
The Board of Supervisors of the European Insurance and Occupational Pensions Authority (‘EIOPA’) agreed on the 28th of June 2023 that they will coordinate the first joint mystery shopping exercise on sales on insurance. This exercise will be conducted in 8 Member States and will follow a common methodology and criteria developed by EIOPA and its Members. The results of the exercise will be available in the first half of 2024.
The European Supervisory Authorities launch public consultation on the first batch of Digital Operational Resilience Act policy products
On the 19th of June, the European Supervisory Authorities (‘ESA’) launched a public consultation on the first batch on policy products under the Digital Operational Resilience Act (‘DORA’), which includes four draft regulatory technical standards and one set of draft implementing technical standards. The consultation will run until 11th September 2023 and comments on the public consultation can be sent through the consultation page.
A common understanding of greenwashing and warning on risks
The ESA published their progress reports on greenwashing in the financial sector on the 1st June 2023.
In these reports, a common high-level understanding of greenwashing applicable to market participants across their respective remits have been put forward. The final greenwashing reports will be published in May 2024 and will consider final recommendations, including on possible changes to the EU regulatory framework.
Amendments to References to the Conduct of Business Rulebook
On the 25th May 2023, the MFSA issued a circular with the amendments to references to the Conduct of Business Rulebook as laid down in Annex I and Annex II to Chapter 9 of the Insurance Rules and in Annex I and Annex II to Chapter 16 of the Insurance Distribution Rules. These include references to general good provisions regulating insurance distribution in addition to those set out in the Insurance Distribution Directive, which are required to be observed by European insurance undertakings and European intermediaries authorised in a Member State or EEA State other than Malta, which provide cross-border activities in Malta as host Member State.
The amendments being carried out are aimed primarily to update the references to relevant Rules of the Conduct of Business Rulebook currently found within the said Annexes, in order to ensure that such references are accurate and proper.
New Application for the Incorporation of Cells of Protected Cell Companies, Incorporated Cell Companies or Reinsurance Special Purpose Vehicles Securitasation Cell Companies
The Malta Financial Services Authority (‘MFSA’) have presented the new application for the Incorporation of Cells – Form AA42, for which details in this application where previously captures under Form AA12, which has now been separated in order to simplify the application process, increase efficiency and to make the requirements clearer from the outset.
After the 16th of June 2023, the MFSA will no longer be accepting the Form AA12 for applicants seeking to apply for the incorporation of cell.
Update to The Nature and Art of Financial Supervision – The Demands and Needs Assessment
Following the Demands and Needs Assessment workshop that was held on the 23rd November 2022, the MFSA updated the Circular, that was originally issued on 24th May 2022 in order to address and further clarify certain aspects on the manner in which a demands and needs assessment is to be conducted.
The amendments carried out clarify that the scope of the circular is to provide guidance and outlines best practices in the context of the demands and needs assessment which insurance distributors are required to carry out in accordance with their regulatory requirements. The latest version of the document can be accessed through here.
Macro and Market risks as top concern for insurers
On the 15th May 2023, EIOPA published the Risk Dashboard of Q4 2022 Solvency II data, where the analysis shows that insurers’ exposure to macro and market risks are currently the main concern for the insurance sector, while all other risk categories are at medium level.
Risks related to the macroeconomic environment continue to be the most relevant for the insurance sector, whilst forecasts for global GDP growth have ticked up slightly and projected consumer prices are in the higher range of previous assessments. It was also noted that the market risks are high amid increased volatility in the bond and equity markets, whilst liquidity and funding risks have also increased.
The Reporting Requirements under IFRS17 for Insurance Contracts
Following the MFSA’s survey “Is your business ready for IFRS 17 - Insurance Contracts?” on 29th September 2022, on the 25th April 2023, the Authority took into consideration the feedback collected through the survey and has circulated the National Specific Templates (Quarterly National Specific Templates - ‘QNSTs’ and Annual National Specific Templates - ‘ANSTs’).
These new QNSTs and ANSTs can be found in Appendix I and Appendix II which are to be utilised until such time that such templates are embedded within the Insurance Rules issued under the Insurance Business Act (Cap. 403). In view that IFRS 17 has an effective date of 1 January 2023 and therefore the first set of audited financial statements will be prepared in 2024, the Authority is allowing the option for Insurance Undertakings to report under the current IFRS 4 QNSTs up until the quarterly reporting Q3 2023 (financial year). As from Q4 2023 (financial year), all Insurance Undertakings are required to report under the new IFRS 17 QNSTs.
With respect to the Quantitative Reporting Templates ‘QRTs’, EIOPA advised that there will be no changes, however the MFSA reminds Insurance Undertakings to keep in mind the specific attributes needed for the completion of the QRTs which no longer form part of the statement under IFRS 17.
Moreover, the MFSA is also informing the Insurance Industry that the financial projections included within the new applications should be presented in accordance with IFRS 17.
Contact us
Karl Mercieca
EY Malta Financial Services Regulatory Compliance
Partner
karl.mercieca@mt.ey.com
Leanne Haber
EY Malta Financial Services Regulatory Compliance
Senior Consultant
leanne.haber@mt.ey.com
