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Alternative Investment Fund Managers Directive: European Commission proposal

The European Commission has published its proposal to revise the Alternative Investment Fund Managers Directive (AIFMD) as part of the EU Capital Markets Union package.

Markets in Financial Instruments Regulation (MiFIR): European Commission proposal

European Long-Term Investment Funds (ELTIFs) regulation: European Commission proposal

The European Commission has published its proposal to revise the European Long-Term Investment Funds (ELTIFs) Regulation as part of the EU Capital Markets Union package.

ECB issues report on the state of climate and environmental risk management in the banking sector

The European Central Bank (ECB) has published its report on the state of climate-related and environmental (C&E) risk management within the European banking sector, a follow up publication to their supervision newsletter article published in August. 

EBA Consultation Paper on Draft ITS Pillar 3 Disclosures on ESG Risks

The European Banking Authority (EBA) is implementing a new policy strategy regarding institutions’ Pillar 3 disclosures. The new Pillar 3 disclosures aims to promote transparency and enhance institutions’ management of Environmental, Social or Governance (ESG) risks. 

Climate risk quantification

The global economic crisis that resulted as a consequence of the pandemic has stressed the relevance of prioritising sustainability pillars within financial services.

Prudential Consolidation and consolidated K-Factors: What to Expect under the IFR & IFD?

European regulatory authorities have introduced new legislation, referred to as the Investment Firms Regulation EU 2019/2033 (‘IFR’) and Investment Firms Directive EU 2019/2034 (‘IFD’), which aims to establish a tailored prudential framework for investment firms.

Central Bank of Ireland’s Quarterly Insurance Newsletter

In December 2021, the Central Bank of Ireland published its quarterly Insurance Newsletter which covers the following topics:

• ORSA: Learnings from the 2021 thematic review of ORSA;
• Insurance Updates: Various updates on EIOPA internal model comparative study, Private motor National Claims Information Database (NCID) Report and the Solvency II Review; and
• Sustainable Insurance: Update on sustainable finance initiatives relevant to the insurance sector.

Insurance Europe publishes response to European Commission’s proposed Solvency II reforms

On 18 January 2022, Insurance Europe published its response to the European Commission’s consultation on its proposals for the review of the Solvency II regulatory framework. The response notes that the Solvency II review should:

• Correct the excessive capital requirements and artificial volatility for long-term business by aligning the measurements with the real risks faced by insurers, while keeping customers very well protected. 
• Improve proportionality and avoid increasing costs and operational burden. 
• Maintain the existing, well-designed supervisory ladder of intervention.

EIOPA outlines key macroeconomic developments and risks

The European Insurance and Occupational Pensions Authority (EIOPA) published its 2021 Financial Stability Report on 13 December 2021. The report covers key macroeconomic developments and key risks for the insurance and pensions sectors. Key developments and risks discussed in the report include:

• The Growth outlook for European countries continues to be impacted by COVID-19 pandemic-driven uncertainties.
• Elevated inflation levels could be a significant source of risk for non-life insurers.
• Climate risk, as evidenced by the significant natural catastrophes during Summer 2021, remains at the top of the risk agenda with particular focus on risk management practices to mitigate underwriting risk.
• Insurers outperformed the market at the beginning of the year but since then their fortunes reversed reflecting that other sectors have received a greater stock price benefit from the current macro environment.
• The industry’s understanding of the increasingly significant cyber risk remains limited and data collection and cyber risk modelling therefore need to be improved if insurers are to benefit from the anticipated growth in cyber coverage demand.