Since the publication of our insight " Central Bank of Ireland - Thematic Inspection of Product Oversight & Governance" on 30 June 2023, the European Insurance and Occupational Pensions Authority ("EIOPA") has published a peer review on product oversight and governance ("POG") which focuses on how national competent authorities ("NCAs) in the European Economic Area are supervising the application of POG requirements by insurance manufacturers.
The report was published on 20 July 2023 and found that most NCAs had adapted their internal processes to include the supervision of POG requirements introduced by the Insurance Distribution Directive ("IDD") and the relevant Commission Delegated Regulation. The report also noted that some NCAs were still building their supervisory POG framework, and there remains significant differences regarding the level of maturity of POG supervision. In summary, 6 NCAs broadly met expectations, 2 met most expectations, 4 met some expectations and 18 met few expectations.
The report found that Ireland fell into the group of "NCAs broadly meeting expectations" with only one recommended action. EIOPA recommended that Ireland take action within the area of 'Setting and communicating supervisory expectations'. They recommended that the Central Bank of Ireland ("Central Bank") formulate and communicate in a formal manner or via supervisory dialogues, a comprehensive set of supervisory expectations covering all the elements of POG requirements. They also recommended that the Central Bank follow up on these expectations by challenging the effectiveness of POG arrangements by supervised entities based on these expectations.
Implications for Ireland
In its report, EIOPA noted that some NCAs, including Ireland, "are planning to set and communicate to the market clearer expectations on POG through publications and supervisory dialogue with insurance undertakings". The report goes on to state that these communications fell outside the reference period of the peer review but would be considered during the follow-up phase.
Clients will note from the above mentioned Insight, that the Central Bank in its' quarterly Insurance Newsletter has recently detailed good practices which insurers should consider embedding into their own POG arrangements. These good practices were derived from observations made by the Central Bank during its thematic inspection of POG requirements. We understand that this is the communication which fell outside the reference period of the report. In accordance with the report, these steps will be monitored and assessed by EIOPA during the follow up phase of the peer review. It is unclear as to whether this action will be enough to address EIOPA's recommendation or whether the Central Bank will deem a more comprehensive formal communication on the matter, such as a Dear CEO Letter, to be warranted. We will update clients should developments occur. In the meantime, firms should carefully consider the expectations of the Central Bank set out in the Insurance Newsletter and take steps to ensure that their POG framework is aligned with the stated regulatory expectations.
How we can assist
Matheson's Financial Institutions Group includes a specialist team of highly experienced lawyers who are focussed exclusively on advising insurance clients and have the necessary expertise to assist clients with all aspects of POG.