1. Insurance Ireland Code of Practise for Underwriting Mortgage Protection Insurance for Cancer Survivors
On 7 June 2023, Insurance Ireland published details of a new Code of Practice for Underwriting Mortgage Protection Insurance for Cancer Survivors ("Code"). The Code is being introduced in light of discussions with the Irish Cancer Society regarding the lack of life cover available for cancer survivors in the context of securing a mortgage.
The Code represents the minimum requirements agreed which, according to the Code, goes beyond the existing regulatory requirements for insurers but notes that an individual insurance firm may decide to go further if it so chooses.
The Code reiterates a number of fair treatment principles which Irish insurers already operate to. In addition to those principles, insurers also commit as follows:
Insurers will disregard any disclosed cancer diagnosis where all of the following circumstances apply and an application for decreasing term assurance in association with a mortgage will not be rejected, nor will a higher premium apply, in relation to the cancer condition, if:
- the application is for a new individual decreasing term life insurance contracts in connection with a mortgage, covering the risk of mortality only;
- the application is for a policy in connection with a mortgage on the applicant’s principal private residence;
- the amount of life insurance is the lesser of the mortgage amount OR €500,000 per applicant; and
- treatment for cancer ended more than seven years prior to their application or more than five years if the applicant was under 18 at the time of diagnosis.
The Code will be effective from 6 December 2023, following a six-month implementation period.
Review of the Code
Insurance Ireland have advised that a review of the implementation of the Code by an external reviewer will take place in January 2025 with a further review every three years thereafter.
Signatories to the Code:
The following Insurance Ireland members are signatories Acorn Life, Aviva Life & Pensions, Irish Life, Laya Healthcare, New Ireland Assurance, Royal London and Zurich Life Assurance plc. Insurance Ireland notes that it is open to non-members to sign up to the Code.
Speaking on publication of the Code, the Minister for Finance, Michael McGrath, commented that the Code “advances the issue of access to mortgage protection insurance for cancer survivors, which is a key concern of Government and is a message I strongly relayed to the industry earlier this year. Importantly, the relevant firms have up to six months to implement the Code, meaning it should be operational before the end of the year. This is something we will monitor closely."
Minister of State for Financial Services, Credit Unions and Insurance, Jennifer Carroll MacNeill, commented that during her meeting recently with Insurance Ireland she "stressed the need for the Code to be underpinned by strong oversight mechanisms. The inclusion of a review process is important in order to assess whether the Code is delivering improved access to cover for cancer survivors”. She advised that the Department of Finance will "continue to closely monitor the rollout of the Code, and engage with industry regarding its implementation".
Brokers Ireland list of brokers advising on life cover for clients with pre-existing illnesses
In addition to the publication of the Code, both Ministers welcomed the publication by Brokers Ireland of a list of specialist brokers to assist consumers who have had difficulty acquiring Life Cover due to a pre-existing illness.
EU access to financial services for cancer survivors
The Department of Finance has also confirmed that it will "continue to monitor ongoing policy developments at the EU-level regarding the issue of access to financial services for cancer survivors" including the European Commission's plans for development a Code of Conduct by 2024 under “Europe’s Beating Cancer Plan”.
2. Sharon Donnery, Deputy Governor of the Central Bank of Ireland speech on climate risk and the banking speech
On 12 June 2023, Sharon Donnery, Deputy Governor at the Central Bank of Ireland ("Central Bank") gave a speech at BPFI Retail Banking Conference 2023 on climate risks and the banking sector. The following is a summary of some of the key points addressed in her speech:
Current risk environment
At the outset the Deputy Governor spoke to the current risk environment. She noted that in the face of recent challenges the Irish economy and financial sector has "so far proven itself resilient", however, despite this "risks clearly remain" and it is "not a time for complacency". In this regard, the Central Bank has announced that from June 2024 the countercyclical capital buffer rate ("CCyB") will be increased to 1.5%. The Deputy Governor noted that should risks materialise the Central Bank "will not hesitate to partially or fully release the CCyB to maintain the supply of lending to the economy".
She cautioned that in these challenging times "the responsibility of financial service providers to their customers is at its most important" and when considering passing on of central bank interest rate changes to customers, it is essential that banks ensure "customers interests are at the heart" of decision making.
Climate risks and the banking sector – supervisory expectations
The Deputy Governor explained that supervisors' fundamental expectations of the banking sector is that they identify and effectively manage the risks they are exposed to, including climate risk which is no longer hypothetical "but rather realities of our every day". While acknowledging that integrating climate risks into risk management processes is no easy task for the banking sector, she also explained that "it needs to be fostered by regulators". In this context the Deputy Governor highlighted some of the activities of both the European Central Bank ("ECB") and the Central Bank in this area over the course of 2022 including:
- completion of the ECB's Climate Stress Test for Significant Institutions and a Thematic Review on Climate and Environmental Risks. The Deputy Governor noted that these exercises found that while progress has been made more needs to be done. Regarding banks’ climate stress-testing capabilities she noted that there are deficiencies, data gaps and inconsistencies across institutions. Additionally, regarding bank strategies, she noted that some do not address all risks comprehensively;
- the Central Bank's horizontal assessment of Less Significant Institutions’ board-approved plans relating to climate-related and environmental risks. The Deputy Governor noted that similar to the ECB's exercises, this assessment shows that while progress has been made since the initial assessment, the majority of the plans "lacked ambition" and varied significantly in quality. She added that there has been insufficient progress to "ensure that climate and environmental risks are adequately addressed and mitigated" and that boards do not have "clear, credible and achievable plans in place, supported by the necessary resources and capabilities", to meet the supervisory expectations in this area.
Given the that the common theme from these exercises is that more needs to be done by the banking sector, the Deputy Governor explained that by the end of 2024, the Central Bank and the ECB "expect significant institutions to meet all remaining supervisory expectations on climate and environmental risks, including full integration in the Internal Capital Adequacy Assessment Process and stress testing". She stressed that supervisors will be closely monitoring banks’ progress in meeting these expectations. Additionally, she confirmed that "all measures in our supervisory toolkit are available to ensure they are met".
Opportunities – CPC Review early findings
The Deputy Governor noted that opportunities in the area of climate are also rising and what started out as something led by policy makers is now being driven by investor demand. She highlighted that key to meeting and sustaining investor demand is the need to "ensure the transparency and integrity of ESG data and the credibility of ESG products". To that end, addressing greenwashing is a key focus of the Central Bank and the European Supervisory Authorities ("ESAs").
The need to ensure transparency in this area, she explained, has also been highlighted in an early finding of the Central Bank's review of the Consumer Protection Code ("CPC"). The Deputy Governor explained that "a need to increase trust in the sustainability claims of the products currently being offered" has come through in the review. On a positive note, she explained that the early findings indicate a broad acknowledgement that the financial system has a vital role to play in supporting the transition to a climate neutral economy - an opportunity and a responsibility for the financial sector.
The Deputy Governor concluded that while progress has been made, there is much more to do. She stressed that action is needed now, this means focusing on the integration of climate and environmental risks into business models, strategies and risk management practices - "As with everything, good governance and board leadership will be key."
3. Crypto-Assets Update
BEUC file complaint with the European Commission and the CPC Network against social media platforms for facilitating the misleading promotion of crypto assets on their platforms.
On 8 June 2023, the European Consumer Organisation ("BEUC") and nine of its members organisations, in Denmark, France, Greece, Italy, Lithuania, Portugal, Slovakia and Spain filed a complaint with the European Commission ("Commission") and the Consumer Protection Cooperation Network ("CPC Network") against a number of companies ("Companies") for committing unfair commercial practices by allowing for the increased presence of misleading advertisements for crypto assets on their platforms ("Complaint")
BEUC argues that these Companies have allowed their platforms to operate in such a manner that "presents increased risks for hidden advertising, given that commercial elements are mixed with social and cultural user-generated content".
The Nature of the Complaint
In their Compliant entitled "Hype or harm? The great social media crypto con", the BEUC described the Companies as having "loose policies" which it maintains led to the growth in misleading advertising of crypto assets. This was facilitated through promotions and endorsements from 'Finfluencers'. The BEUC argues that the platforms, by allowing the advertisements to subsist and grow, have committed unfair commercial practices, contrary to Article 3(4) of Unfair Commercial Practices Directive ("UCPD").
The Complaint criticised the Companies' policies for the advertising of crypto assets, suggesting that they were not sufficiently comprehensive. In particular, BEUC referred to the 'quirk' in some policies that allows for advertisers to promulgate advertisements about “events, education or news related to cryptocurrency or block chain technology, as long they do not 'offer' cryptocurrency products or services without written authorisation". BEUC coined this qualification and other shortcomings in the Companies' policies as "dubious" and "insufficient", as they permit the transmission of misleading information by affording "considerable leeway to the promotion of products" in a manner which would "downplay the risks associated to crypto investments" by painting them in a positive light. Additionally, BEUC highlighted the lack of uniformity in the Companies' enforcement of such policies across European countries.
The Rise of 'Finfluencers'
The Complaint explains that consumers are increasingly turning to 'Finfluencers', influencers that promote financial investments for financial advice, but warns that 'Finfluencers' may "omit material information that the average consumer needs, according to the context, to take an informed transactional decision” leading the consumer to act to their detriment. Moreover, they can fall foul of the UCPD where they fail to make clear to the consumer that there lies a commercial element within their content.
Calls to the CPC Network
While acknowledging the efforts of national authorities in the prevention of misleading crypto advertisements on social media, BEUC calls on the CPC Network to adopt a uniform approach to the enforcement of the UCPD at European level. More specifically, BEUC called on the CPC-Network to:
- require the Companies to submit reports to the Commission detailing the effectiveness of such stricter conditions and carry out diligent policing to ensure the measures are properly enforced; and
- liaise with the European Supervisory Authority for financial services to ensure that platforms revise their advertising policies to prevent the misleading promotion of crypto.
Upcoming Legislative Developments
The BEUC flags that the Digital Services Act ("DSA") will impose several due diligence obligations on these Companies and others, such as obligations of advertising transparency and traceability. However, these obligations will not apply until 4 months after designation - August 25 2023. BEUC adds that it is hoped that the DSA will "coexist" with the UCPD, each with their own distinct objectives.
However, BEUC Director General Monique Goyens maintains that the Market in Crypto Assets Regulation ("MiCA") will not apply to social media companies "benefitting from the advertising of crypto" and it is against this background that BEUC are calling on the Commission to look to protect consumers captured by these activities.
We now await a response from the Commission on the Complaint.
MiCA Regulation and Transfer of Funds Regulation published in Official Journal of the EU
On 9 June 2023, Regulation (EU) 2023/1114 on markets in crypto-assets ("MiCA") and Regulation (EU) 2023/1113 on information accompanying transfers of funds and certain Crypto-Assets ("Transfer of Funds Regulation") were published in the Official Journal of the European Union ("EU")
As reported in the FIG Top 5 at 5 of 20 April 2023 and FIG Top 5 at 5 of 18 May 2023, on 20 April 2023, the European Parliament voted to adopt the MICA and Transfer of Funds Regulation proposals and the Council of the EU voted to adopt the proposals on 16 May 2023.
Both regulations enter into force on the twentieth day following that of their publication in the Official Journal of the EU being 29 June 2023 and apply from 30 December 2024. By way of derogation, the MiCA provisions on stablecoins will apply from 30 June 2024.
4. European Parliament and Council of the EU reach provisional agreement on the Proposal for reform of the Directive on financial services contracts concluded at a distance
On 6 June 2023 the European Parliament ("Parliament") and the Council of the European Union ("Council") reached a provisional political agreement on the reform of European Union ("EU") rules on the marketing of financial services contracts at a distance. The proposed directive aims to better protect consumers by ensuring that all financial services are covered by these rules, including those which are not covered by specific sectoral legislation.
In the press release announcing the agreement, the Parliament highlighted the following aspects of the proposed directive:
Support for Consumers
- The agreement focuses on clarifying the scope of the legislation and modernising pre-contractual obligations including:
- consumers must be provided with information in advance and not at the time the distance contract is concluded to ensure that they have sufficient time to understand the pre-contractual information, compare offers and make an informed decision;
- consumers can request human intervention rather than automated online interfaces;
- consumers are guaranteed the right to receive adequate explanations from traders;
- traders who contact consumers by phone must disclose the commercial purpose of the call at the beginning of the conversation and whether it is being recorded; and
- the right of withdrawal from relevant contracts by the inclusion of a "withdrawal function" in the service provider's interface.
Prohibiting "dark patterns"
The website design of financial service providers should be prohibited from leading consumers into making choices not in their interest such as 'dark patterns'. Such practices include
- making contracts more difficult to leave than they are to enter;
- certain choices being given more prominence; and
- repeatedly asking for a choice that has already been made.
The provisional agreement must now be adopted and endorsed by both the Parliament and the Council. Once this process is completed, the directive will be published in the Official Journal of the EU and will enter into force 20 days later. Member States will then have 24 months to transpose the directive into national law and a further six months to ensure compliance
5. AML/Sanctions Updates
Council agrees general position on proposal for a directive on the definition of criminal offences and penalties for violation of EU sanctions.
On 9 June 2023, the Council of the European Union ("Council") agreed its general position regarding the European Commission's ("Commission") proposal for a directive on the definition of criminal offences and penalties for the violation of European Union ("EU") restrictive measures (restrictive measures are more commonly referred to as EU sanctions).
On the submission of the proposal for this directive, the Commission explained that the directive's obligation is to “make it easier to investigate, prosecute and punish violations of restrictive measures in all Member States”. Currently, the implementation and enforcement of EU sanctions is at the discretion of each Member State. As a result, there exists varying definitions of offences and penalties in respect of breaches of EU sanctions across the EU.
The proposed directive identifies the conduct which Member States must criminalise. From a financial services prospective, the following should be noted:
- making funds or economic resources available to, or for the benefit of, a designated person, entity or body;
- failing to freeze such funds without undue delay;
- entering into transactions with third countries, bodies of a third country, or entities owned or controlled by a third state or bodies thereof, which are prohibited or restricted by EU restrictive measures;
- the provision of brokering services or other services relating to such goods;
- providing financial activities which are prohibited or restricted, which includes the provision of financing and financial assistance, the provision of investment and investment services, the issuance of transferrable securities and money market instruments, the acceptance of deposits, provision of specialized financial message services, the dealing in bank notes, the provision of credit rating services, and the provision of crypto assets and wallets: and
- circumventing an EU restrictive measure through:
- the concealment of funds or economic resources owned, held, or controlled by a designated person, entity or body, which should be frozen in accordance with EU sanctions, by the transfer of those funds, or economic resources to a third party;
- the concealment of the fact that a person, entity or body subject to restrictive measures is the ultimate owner or beneficiary of funds or economic resources, through the provision of false or incomplete information;
- the failure by a designated person, entity or body to comply with an obligation under EU sanctions to report funds or economic resources within the jurisdiction of a Member State, belonging to, owned, held, or controlled by them;
- the failure to comply with an obligation under EU sanctions to provide without undue delay information on funds or economic resources frozen or information held about funds and economic resources within the territory of the Member States, belonging to, owned, held or controlled by designated persons, entities or bodies and which have not been frozen, to the competent administrative authorities; and
- the failure to cooperate with the competent administrative authorities in any verification of information upon their reasoned request.
Council's General Approach
In its press release announcing its general approach, the Council highlighted the following:
- Member States must ensure that violating EU sanctions is punishable by "effective, proportionate and dissuasive criminal penalties". Additionally, aggravating circumstances will also need to be taken into account on the determination of any penalty;
- Member States should increase efforts to ensure that EU sanctions are "respected". With this in mind, the proposal requires Member States to provide for a limitation period that allows for law enforcement and to take measures to freeze and confiscate any proceeds attained through violations of EU sanctions; and
- Member States must guarantee cooperation and coordination between its various law enforcement and judicial authorities. European level cooperation on criminal investigations into sanction violations between Member States, the Commission and other relevant agencies will also be expected.
The proposal for the Directive now moves to the European Parliament for consideration.
European Parliament and Council of the EU reach provisional agreement on the Proposal for a Directive to amend Directive (EU) 2019/1153 regarding a single access point to bank account registries
On 6 June 2023, the European Parliament ("Parliament") and Council of the EU ("Council") reached provisional agreement on the Proposal for a directive to amend Directive (EU) 2019/1153 as regards access of competent authorities to centralised bank account registries through the single access point ("Proposal").
The upcoming Proposal for a Directive to Prevent the Use of the Financial System for Money Laundering or Terrorist Financing ("6MLD") will require Member States to make information from centralised bank account registers available through a single access point to financial intelligence units ("FIUs"). The Proposal was necessary to ensure the same access to law enforcement authorities across the European Union ("EU").
In welcoming the agreement on the Proposal, the European Commission ("Commission") highlighted that the Proposal will "provide law enforcement authorities quick access to information on the accounts where criminals and terrorists keep or hide their funds or assets and "to the single access point interconnecting bank account registers". It will also "harmonise the format in which banks and crypto companies send transaction records to the investigating authorities" and allow for more effective confiscation of criminal profits through faster tracing of criminal assets.
The provisional agreement will now have to be endorsed by Member States representatives before its adoption by both the Council and the Parliament.
This adoption will go hand in hand with the adoption of the other legislative proposals under the Commission Action Plan for a Comprehensive Union Policy on AML/CFT.
As reported in the FIG Top 5 at 5 of 6 April 2023, on 28 March 2023, the Parliament's Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs committees adopted their position on the 6MLD, the Regulation to establish an EU AML Authority and the Regulation on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. This position was confirmed by the Parliament on 17 April 2023.