European Insurance and Occupational Pensions Authority
COVID-19 - EIOPA publishes statement on insurers’ dividend distribution and variable remuneration policies - 2 April 2020
The European Insurance and Occupational Pensions Authority (EIOPA) has published a statement urging insurers to temporarily suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders in light of the COVID-19 pandemic. The statement follows EIOPA’s 17 March 2020 statement, which called on insurers to take measures to preserve their capital positions, including by following prudent dividend distribution and variable remuneration policies.
EIOPA explains that this prudent approach should be applied by all insurance groups at the consolidated level, including significant intra-group dividend distributions which may materially influence the solvency or liquidity position of the group or of one of the undertakings involved. EIOPA reiterates that insurers’ assessments of their overall solvency must be forward-looking, taking into account the current level of uncertainty in relation to the size and duration of the impact of COVID-19 on financial markets and the economy. Insurers should review dividend suspensions as the financial and economic impact of the COVID-19 pandemic becomes clearer.
The statement also urges insurers to adopt a prudent approach to variable remuneration policies, including setting variable remuneration at a conservative level and considering its postponement.
EIOPA statement urging insurers to temporarily suspend dividend distributions and share buy backs in light of COVID-19
Press release
COVID-19 - EIOPA publishes update on consultations and data collections - 2 April 2020
EIOPA has published an update on the extent to which its consultations and data collections have been affected by the COVID-19 pandemic. Among other things, EIOPA confirms that it is extending:
- its consultation on reviewing technical implementation means for the package on supervisory reporting and public disclosure under the Solvency II Directive (2009/138/EC) by six weeks from 20 April to 1 June 2020;
- its consultation on implementing technical standards (ITS) under Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (PEPP Regulation) by four weeks from 20 May to 17 June 2020;
- the period for commenting on its discussion paper on interbank offered rate (IBOR) transition by nine weeks from 30 April to 30 June 2020; and
- the information request deadline for its market and credit risk comparative study by five weeks from 31 May to 3 July.
EIOPA also confirms that: (i) it has decided to delay the publication of its discussion notes on value chain/InsurTech and on methodology principles of insurance stress testing until further notice; (ii) its information request to national competent authorities (NCAs) relating to the long-term guarantees review under Solvency II will be postponed from the Q2 to Q3 2020; (iii) its data collection on the impact of ultra-low yields on insurers will now incorporate COVID-19 reflections, if necessary; and (iv) it has decided to cancel the planned data request relating to the 2020 climate risk sensitivity analysis and intends to produce the report with already-available information.
Press release: EIOPA publishes update on consultations and data collections in light of COVID-19
Supervision of remuneration principles in the insurance and reinsurance sector - EIOPA publishes Opinion - April 2020
EIOPA has published an Opinion, dated 31 January 2020, on the supervision of remuneration principles in the insurance and reinsurance sector. The Opinion aims to enhance the supervisory convergence of the remuneration principles set out in the Solvency II Delegated Regulation (EU) 2015/35 and provide guidance for national competent authorities (NCAs) on the application of the principles to supervised undertakings. EIOPA consulted on a draft version of the Opinion in July 2019.
In particular, the Opinion focuses on the application of the principles to a reduced scope of staff, identified as potential higher profile risk-takers. However, EIOPA states that NCAs may apply the guidance to staff below the prescribed thresholds, taking into account: (i) remuneration practices in the relevant national markets; (ii) individuals’ specific responsibilities; and (iii) the size and risk profile of the relevant undertaking. EIOPA states that the thresholds included in the Opinion should be used for the purposes of supervisory dialogue and not as hard targets for the practical implementation of Solvency II remuneration principles.
EIOPA plans to start monitoring the application of the Opinion by NCAs in 2022.
EIOPA Opinion on the supervision of remuneration principles in the insurance and reinsurance sector
EIOPA feedback statement to consultation on draft Opinion
Webpage
Press release
Prudential Regulation Authority
COVID-19 - PRA publishes statement welcoming insurers’ decision to pause dividend payments - 8 April 2020
The PRA has published a statement welcoming the decision of some insurance firms to pause dividend payments in light of the COVID-19 pandemic. This follows the PRA’s ‘Dear CEO’ letter to UK insurance firms, published on 31 March 2020, requesting that firms adopt prudent dividend distribution policies and manage their financial resources prudently in light of the current economic conditions.
PRA statement welcoming insurance firms’ decision to pause dividend payments
Financial Conduct Authority
COVID-19 - FCA updates webpage for firms on new rules regarding the provision of pension information - 3 April 2020
The FCA has updated its webpage containing information for firms in response to the COVID-19 pandemic to include a new section on communicating certain pension information to consumers.
The FCA notes that several firms are experiencing difficulties in implementing new rules which change the information that firms must provide to consumers entering pension drawdown or taking an income for the first time, and the annual information given to these consumers. The new rules, set out in PS19/1, were finalised in January 2019 and come into effect on 6 April 2020. Therefore, the FCA expects firms to have already implemented these rules or be in the final phases of implementation.
The FCA states that it understands that firms may experience operational challenges in testing and finalising processes in light of the disruption caused by the COVID-19 pandemic, particularly where firms rely on third parties to complete this work. It acknowledges that some firms may not be able to avoid a short delay in implementing the rules. Nevertheless, the FCA expects firms to implement the new rules as soon as reasonably practicable and, if this is later than 31 May 2020, to notify it in accordance with Chapter 15 of the Supervision manual (SUP).
Updated FCA webpage on information for firms in response to COVID-19
COVID-19 - FCA publishes guidance for pension providers and deferred benefit pension transfer advisors - 7 April 2020
The FCA has published a new webpage providing guidance for pension providers and deferred benefit pension transfer advisors in light of the COVID-19 pandemic. Among other things, the guidance for pension providers states that:
- when communicating with customers, unless they are willing to comply with the conduct requirements for making personal recommendations, providers must be careful not to provide regulated advice by steering the customer to a specific course of action on their investments;
- providing a warning to customers, who wish to change and de-risk their investments, about the relevant risks to consider when making such a decision will not amount to a personal recommendation, provided that the language used clearly demonstrates that the firm wants to ensure the customer makes a considered and informed decision; and
- providers can communicate proactively with customers, including providing additional information and details of planned communications in the coming weeks and months, where they consider there is a current information need.
The webpage sets out a table identifying certain risk factors which providers should consider in the current economic climate, including: (i) sustainability of income in retirement; (ii) investment risk; (iii) tax implications; and (iv) charges.
The webpage also sets out the FCA’s guidance for deferred benefit pension transfer advisors in light of the COVID-19 pandemic. The guidance states that the FCA expects firms to provide suitable advice, and to follow the existing Handbook rules and guidance, particularly those set out in Chapters 9 and 19 of the Conduct of Business sourcebook (COBS). The guidance provides information on how advisors can demonstrate that transfers are suitable, how to address customer misconceptions and how to deal with consumers transferring against advice received.
The Financial Ombudsman Service (FOS) also confirms that, in deciding what is fair and reasonable in all the circumstances of a complaint, this guidance will be taken into account if a customer brings a complaint against a firm regarding its pension transfer advice.
FCA webpage on guidance for pension providers and deferred benefit pension transfer advisors in light of COVID-19
Signposting to travel insurance for consumers with medical conditions - FCA publishes addendum to Policy Statement - April 2020
The FCA has published an addendum to its February 2020 Policy Statement (PS20/3) containing final rules and guidance on travel insurance and consumers with pre-existing medical conditions. Under the new rules, travel insurance firms are required to signpost such consumers to a directory of specialist providers.
The FCA explains that 20 responses to its consultation were not reviewed due to a system error, which the FCA describes as an isolated incident that has not impacted any other consultations. The FCA states that these responses have now been reviewed and the addendum contains its comments on stakeholders’ responses.
FCA addendum to Policy Statement PS20/3 Signposting to travel insurance for consumers with medical conditions
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