FIG Top 5 at 5 – 25/09/2025

On 23 September 2025, the Central Bank of Ireland (“Central Bank”) announced its call for applications to the second innovation sandbox programme (“2026 Sandbox”) at its 2025 payments seminar (“Seminar”).

As reported in the FIG Top 5 at 5 dated 11 September 2025, the theme of the 2026 Sandbox is “Innovation in Payments”.

The Central Bank considers it important that it deepens its understanding of the opportunities and risks of different technologies and innovations, with the ultimate goal being that the benefits of innovation will be realised for consumers of financial services while risks are managed effectively.

Speaking at the Seminar, Deputy Governor Vasileios Madouros highlighted the importance of payments in the economy, noting the role that innovation has to play, and that if “done well and safely”, can result in broader economic benefits. He further stated that in an environment of rapid innovation in payments, the Central Bank cannot afford to stand back.

The Deputy Governor went on to explain that it is in this context that the Central Bank decided on innovation in payments as the theme for the 2026 Sandbox.

The 2026 Sandbox will provide an opportunity for the Central Bank to further engage with the private sector as regards payments and will aim to:

• foster innovative solutions that will result in safer, faster and more inclusive payments for households and businesses; and
• give the Central Bank early insight into supervisory questions and emerging risks.

The Central Bank is interested in hearing from applicants at every stage of development and also highlighted its interest in receiving applications from partnerships.

On its dedicated innovation sandbox programme webpage, the Central Bank has set out information regarding the 2026 Sandbox, some of the areas address are as follows:

• the framework for the 2026 Sandbox – stating that it will operate on a cohort basis over six months with a structured programme of workshops, support by way of a dedicated sandbox relationship manage and access to a data platform to test and develop innovations;
• the problem statements for the 2026 Sandbox, covering areas such as:
  • inclusive access to the digital economy;
  • frictionless and transparent money movement;
  • resilient and secure payments; and
  • safe integration of emerging payment technologies;

• suitable applicants including information as to non-Ireland domiciled entities and selection criteria; and
• treatment of intellectual property and confidentiality of information.

Next Steps

The Central Bank advises potential applicants to read its guidance note as to the completion of the application form. Applications will be accepted until 5pm on 10 November 2025. The 2026 Sandbox will commence in January 2026.

On 12 September 2025, the Central Bank of Ireland (“Central Bank”) published its September 2025 Insurance Newsletter (“Newsletter”).

The Newsletter covers areas of relevance and interest to the insurance sector. Some of the matters covered in this edition include:

Insights on asset intensive reinsurance (“AIR”)

In the March 2025 Insurance Newsletter, the Central Bank featured a financial resilience spotlight on the use of AIR,  including its intention to issue a data request to a sample of less than 20 life (re)insurance firms in Q2 2025. For more information, see FIG Top 5 at 5 dated 3 April 2025

The data request contained four sections addressing exposure to AIR / collateral / risk management / impact of default. Eleven firms were surveyed and the Newsletter includes insights from the data request, some of which are as follows:

• Exposure to AIR at the life (re)insurance industry level is broadly in line with what the Central Bank expected to see, with the total exposure at year end 2024 at approximately €30 billion, for the firms surveyed;
• Exposure to AIR is expected to increase by around 5% over the course of 2025;
• Generally, AIR exposure is well collateralised with high quality assets;
• As regards default of the main reinsurance counterparty, it was found that some firms would breach 100% solvency capital requirement (“SCR”)
•  coverage ratio, before allowing for recovery of collateral – this was found to be prevalent for firms that have a concentration of exposure in a single counterparty;
• The Central bank found that all surveyed firms have governance and controls in place regarding AIR exposure and collateral assets. The Newsletter sets out some good risk management practices that it observed, such as:
  • Continual monitoring of reinsurance exposures;
  • Investment mandates are in place, with guidelines and rules for the collateral assets;
  • The ceding firm carries out regular monitoring of the collateral accounts to ensure that investment guidelines are being followed;
  • A range of reinsurers are used to reduce concentration risk to a single counterparty; and
  • The impact of default of the main counterparty, and the corresponding recovery actions are included in the firm’s recovery plan and ORSA.
• The Central Bank took the opportunity to remind firms to engage with their supervisor if there is a plan to enter into material AIR transactions, particularly highlighting that a material change to a firm’s business, due to changes in reinsurance and / or retrocession arrangements, requires pre-notification to the Central Bank as a change of business notification. In this regard, the Central Bank also emphasised that if there is a significant change in a firm’s reinsurance recoverable asset as a result of a particular AIR contract or an accumulation of such contracts, it may request further information and carry out a review.
• The Central Bank also detailed some of its key areas of focus when assessing reinsurance proposals, some of which are as follows:
  • Impact of the transaction on the regulatory balance sheet;
  • Measurement and management of counterparty risk;
  • Stress testing, including recapture risk and the impact on the SCR coverage ratio of counterparty default.
• The following matters / areas were also highlighted by the Central Bank, and firms are advised to have regard to them, including:
  • Solvency II requirements in articles 208- 214 of Commission Delegated Regulation (EU) 2015/35 as regards risk mitigating techniques for standard formula firms;
  • The factors in EIOPA’s July 2021 opinion on the use of risk mitigation techniques by insurance undertakings – with the Central Bank highlighting that this was updated in July 2025 with annexes on mass lapse reinsurance and reinsurance agreements’ termination clauses, for more information, see FIG Top 5 at 5 dated 17 July 2025;
  • The Central Bank’s guidance on intragroup transactions and exposures if the counterparty in intragroup.

The Central Bank advises firms to make sure that any proposed reinsurance transaction is in compliance with the forgoing guidance and requirements and to be able to provide evidence of such compliance.

Overall, the Central Bank found that the quality of collateral assets for AIR is high,  but there are some firms with collateral asset allocations and credit ratings that may be indicative of increased risk – these firms will be subject to follow-up by the Central Bank.

Finally, the Central Bank advises that it will continue to monitor AIR as part of its ongoing supervision, taking into account the expected growth in this area.

Thematic review on consumer treatment when purchasing or renewing health insurance

The Newsletter highlights that the Central Bank recently completed a thematic review on consumer treatment when purchasing or renewing health insurance (“Review”), stating that this  intention was set out in its Regulatory and Supervisory Outlook Report, for more information, see FIG Top 5 at 5 dated 6 March 2025.

The Newsletter states that the Review identified a number of good consumer focused practices but that certain weaknesses and gaps were also evident. In this regard, the Newsletter highlights that the Central Bank issued a “Dear Compliance Officer” letter (“Letter”) in July 2025 which set out the Central Bank’s findings, both good and bad, on foot of the Review together with its expectations.

The Letter requires health insurance providers to complete a gap analysis vis a vis the Central Bank’s expectations and to ensure that a plan is put in place to address any identified gaps and weaknesses. In that regard, the Newsletter sets out the priority expectations which firms are required to assess against – some of these are as follows:

• That firms will always offer a full suitability assessment to consumers who make contact to discuss their existing plan at renewal;
• Utilise their communications with consumers to encourage them to make contact to discuss their existing plan at renewal;
• Websites should include plan comparison tools; and
• There should be sufficient monitoring and oversight of the overall customer support function, including as regards the individual agents.

The Newsletter also highlights its Guidance on Securing Customers’ Interests and urges all insurers to ensure that they are not taking advantage of customer inertia or information asymmetry in the market. The Central Bank expects that health insurance providers will be proactive when it comes to:

• Assessing risks to consumers as regards their products / services; and
• Protecting the best interests of consumers by ensuring they are fully aware and effectively informed of their options and supports available.

Intra-group outsourcing: a review of specialty insurance firms

Continuing with the theme of reviews, the Newsletter highlights a recent Central Bank thematic risk assessment (“Assessment”) across a number of specialty insurance firms during 2025. The Assessment focused on intra-group outsourcing arrangements and the related governance and oversight.

The Newsletters sets out the findings of the Assessment under three headings, as follows:

• Substantive presence and decision making – with the Assessment showing that there is significant reliance on intra-group outsourcing across the specialty firms through the use of a shared services structure or third country branch. The Newsletter emphasises that firms must ensure adequate substance within Ireland with oversight and decision-making taking place at a local level;
• Outsourcing framework – the Assessment found that not all firms had an outsourcing policy and outsourcing strategy that was sufficiently tailored to the local Irish entity and reviewed annually by the local board. In this regard, the Newsletter highlights the 2021 Cross Industry Guidance on Outsourcing, specifically that firms must have a documented firm-wide outsourcing strategy and policy, to be reviewed and approved by the board on, at least, an annual basis; and
• Use of services companies and hybrid arrangements – the Newsletter notes that the Central Bank has observed that firms are increasingly entering into arrangements with the use of separate legal entities for the provision of extensive staffing to the undertaking (usually part of the same group as the undertaking) and goes onto to highlight that the Central Bank is focused on such arrangements, due to their potential to undermine the operational resilience of regulated entities, if not effectively managed.

Under this heading, the Newsletter emphasises the importance of compliance with the Central Bank’s 2022 Guidance on the Use of Service Companies for Staffing Purposes in the Insurance Sector and the 2021 Cross Industry Guidance on Outsourcing for firms with hybrid staffing arrangements.

The Newsletter highlights that, although the Assessment related to speciality insurance firms, the risks, expectations and findings set out in the Newsletter are relevant to all (re)insurance firms with significant intra-group outsourcing arrangements in place.

Additionally, the Newsletter states that the Central bank has issued a “Dear CEO Letter” to all speciality firms setting out the main messages of the Assessment, further stating that individual risk mitigation programmes and recommendations were issued to firms, where relevant.

Finally, the Newsletter sets out that the Central Bank will “incorporate the key messages outlined in the Dear CEO letter into our engagements going forward.”

Solvency II Review and Insurance Recovery and Resolution Directive

The Newsletter contains a section dedicated to EU legislative changes as regards the Solvency II Delegated Acts and the Insurance Recovery and Resolution Directive (“IRRD”).

As regards the amendments to Solvency II, the Newsletter sets out that the Central Bank will be gathering information on the impact on firms of the amendments to Solvency II, particularly focusing on:

• How firms are preparing to implement the changes from January 2027;
• Which firms will be seeking classification as a small and non-complex undertaking; and
• The impact on regulatory balance sheets.

The above information will be collected through supervisory engagement meetings, reviews on reserving, capital and ORSAs and through regulatory transactions with a data request possible in 2026, if considered necessary.

Firms are encouraged to start considering how the changes to Solvency II will affect them.

As regards the IRRD, the Newsletter references the recent closure of the Government’s recent consultation on the national transposition of IRRD – for more information, see FIG Top 5 at 5 dated 17 July 2025.

EIOPA updates

The Newsletter highlights some recent EIOPA updates – much of which has been covered in the FIG Top 5 at 5 over the last three months – such as:

• EIOPA’s report on biodiversity risk management by insurers;
• EIOPA’s public statement on the monitoring exercise on use of climate change scenarios in ORSAs;
• EIOPA’s opinion on artificial intelligence governance and risk management. In this section, the Newsletter highlights the adoption of a distributed model of implementation of the AI Act through  statutory instrument no. 366 of 2025, by the Government, which designated the Central Bank as the market surveillance authority for the purposes of article 74(6) of the AI Act.

Remainder of Newsletter

Some of the matters addressed in the remainder of the Newsletter include:

• The authorisations and gatekeeping report, for more information, see FIG Top 5 at 5 dated 22 May 2025;
• The Q2 2025 insurance corporation statistics;
• Upcoming dates; and
• Links to recent Central Bank speeches / publications.

 

On 16 September 2025, Petra Hielkema, EIOPA Chairperson, delivered a speech (“Speech”) at a conference entitled, “Regulation and Supervision (PROGRES) 2025 – Closing Protection Gaps and Enhancing Inclusive Insurance Through Regulation”.

The theme of the Speech centred around the supervision of AI and how a balance can be achieved so as to harness the benefits of AI but to ensure that it is done in a way that is secure, sustainable and equitable.

Potential

Ms Hielkema discussed the potential of AI, highlighting various matters, some of which are as follows:

• EIOPA’s data shows that around half of non-life insurers and a quarter of life insurers are already leveraging AI across the value chain;
• unrestricted innovation comes at a cost, mainly the erosion of trust;
• the drawbacks of AI such as limited consideration of consumers’ specific circumstances / the excessive standardisation of settlement procedures / AI can propose higher premiums and reduce access to insurance for high-risk or vulnerable clients;
• data privacy, security and ethical use of data;
• the risk of algorithmic bias, noting that when AI systems are trained on historical data that encompasses years of gender inequality, for example, such biases can be perpetuated and even increased; and
• the pressure that the rise of big data and technology is putting on mutualisation such that the risk pool can become fragmented potentially excluding those who are deemed to be high risk, noting that it must be ensured that personalisation does not erode collective protection. Ms Hielkema highlighted the existence of EIOPA’s consultative expert group on data use in insurance who are focused on exploring how data can be used promote fairness, inclusion, and innovation while safeguarding the principle of mutualisation.

Regulation

Ms Hielkema then turned her attention to the regulation and supervision of AI, highlighting matters such as:

• the fact that much AI infrastructure is concentrated in a few regions in the world, noting that access to these infrastructures is essential, not only to understand them but also to assess risks posed, emphasising that AI systems do not need to be developed locally but they do need to be supervised locally;
• the fact that the regulatory framework is not harmonised which presents challenges for globally active companies and for governments to oversee transnational AI systems;
• she discussed the AI Act, particularly highlighting that in the insurance sector, AI systems used for risk assessment and pricing in life and health insurance are deemed as high-risk under the AI Act –  consequently, human oversight is a requirement. Further, Ms Hilekema reminded her audience that this not a new requirement for insurers, referencing the existing regulation under Solvency II and IDD;
• as regards the remainder of use classes of AI systems in insurance, that is, those not prohibited or high risk, they remain subject to sectoral legislation without new requirements save for the requirement that AI users must ensure AI literacy among their staff and inform customers when they are interacting with AI systems; and
• the principle of proportionality, which is core to the European insurance legislative framework, also applies to the use of AI by insurance undertakings.

 

EIOPA Opinion and IAIS Paper 

Ms Hielkema highlighted and discussed the recent publication of EIOPA’s opinion on AI governance and risk management (“Opinion”) – for more information, see FIG Top 5 at 5 dated 21 August 2025. She stated that the “opinion clarifies existing governance and risk management principles while remaining flexible to allow tailoring for the specific characteristics of different AI systems. Most importantly, it follows a risk-based and proportionate approach, to balance the benefits and risks of AI systems thereby leaving room for innovation.”

Ms Hielkema then directed her attention towards the importance of international cooperation,  particularly highlighting the publication by the International Association of Insurance Supervisors (“IAIS”), in July 2025, of its application paper on the supervision of artificial intelligence – noting that the application paper concluded that no change to the IAIS  insurance core principles (“ICPs”) was needed to supervise AI but rather what is required is  guidance for supervisors on how to supervise in real life on the basis of ICPs.

While discussing the IAIS application paper, Ms Hielkema also discussed the concepts of risk based supervision and proportionality, noting that by focusing on such concepts and approach, the application paper “seeks to find the sweet spot between promoting innovation and minimising risk.”

Ms Hielkema emphasised that EIOPA’s Opinion and the IAIS application paper are the “two most recent and important papers that give recommendations on how to supervise insurance based on existing legislation.”

Next Steps

Ms Hielkema highlighted that:

• EIOPA plans to develop more detailed analysis of specific AI systems or emerging issues related to their use in insurance, and to provide guidance where appropriate;
• the IAIS  will continue to monitor developments and work on an internal toolkit for supervisors; and
• in order to better understand emerging practices in the area of Generative AI (“GenAI”), Ms Hielkema stated that EIOPA is currently carrying out a survey on the adoption of GenAI  governance, and use cases in the insurance sector, with preliminary results showing that there is rapid uptake particularly in back office functions.

On 17 September 2025, the European Commission (“Commission”) adopted a delegated decision (“Decision”) on the renewal of the determination that the solvency regimes in Brazil, Japan and Mexico, applicable to undertakings with their head office in those third countries, are provisionally equivalent to the regime contained in Title I, Chapter VI of the Solvency II directive.

In 2015, two Commission delegated decisions granted provisional equivalence under article 227 of Solvency II to Brazil, Mexico and Japan, these decisions are due to expire on 1 January 2026. Article 227 of Solvency II relates to the equivalence for third-country insurers that are part of groups headquartered in the EU.

Article 227(6) of Solvency II provides for provisional equivalence to be renewed for further periods of ten years in  circumstances where certain criteria in  article 227(5) continue to be met.

In 2024, the Commission was assisted by the European Insurance and Occupational Pensions Authority (“EIOPA”) in concluding that the conditions, upon which the 2015 decisions were based, continue to be met for Brazil, Mexico and Japan.

Accordingly, the Decision renews provisional equivalence for Brazil, Japan and Mexico for a further period of 10 years from 1 January 2026 to 31 December 2035.

Next Steps

The Decision will enter into force 20 days following its publication in the official journal of the European Union.

1. Delegated Regulation Postponing Application Date of Own Funds Requirements for Market Risk Under CRR Published in OJEU

On 19 September 2025, Commission Delegated Regulation (EU) 2025/1496 (“Regulation”) was published in the official journal of the European Union (“OJEU”).

The Regulation amends the capital requirements regulation (“CRR”) as regards the application date of the own funds requirements for market risk, postponing that date by one additional year to 1 January 2027. On that date, the market risk requirements reflecting the Basel Committee on Banking Supervision’s fundamental review of the trading book will apply as a binding capital standard in the EU, as per amendments made to CRR by the CRR III regulation.

The Regulation was adopted by the European Commission in June 2025, for more information see FIG Top 5 at 5 dated 19 June 2025.

Next Steps

The Regulation entered into force on 20 September 2025, being one day following its publication in the OJEU, and will apply from 1 January 2026.

Council Publishes Text of Proposed Regulation to Change Settlement Cycle Under CSDR

On 17 September 2025, the Council of the European Union (“Council”) published the text of the proposed regulation (“Regulation”) amending regulation (EU) No 909/2014 (“CSDR”) as regards a shorter settlement cycle in the EU for transactions in transferable securities.

The European Parliament (“Parliament”) and the Council reached political agreement on the matter in June 2025.

The Regulation will amend  CSDR by shortening the settlement cycle on securities, such as shares or bonds executed on EU trading venues, from two business days (“T+2”) to one after the trading takes place (“T+1”). For more information, see FIG Top at 5 dated 3 July 2025.

Next Steps

The Regulation will now move to the formal adoption stage by the Council, after which, the Regulation will enter into force 20 days following its publication in the official journal of the European Union and will apply from 11 October 2027.

3. Delegated and Implementing Regulations on RTS and ITS Under MiCA Published in OJEU

On 15 September 2025, two regulations under the regulation on markets in crypto assets (“MiCA”) were published in the official journal of the European Union (“OJEU”), as follows:

1. Commission Delegated Regulation (EU) 2025/1125 with regard to regulatory technical standards specifying the information in an application for authorisation to offer asset-referenced tokens (“ARTs”) to the public or to seek their admission to trading; and
2. Commission Implementing Regulation (EU) 2025/1126 laying down implementing technical standards as regards the establishment of standard forms, templates and procedures for the information to be included in the application for authorisation to offer ARTs to the public and to seek their admission to trading.

Both regulations were adopted by the European Commission in June 2025, for more information, see FIG Top 5 at 5 dated 12 June 2025.

Next Steps

The above regulations will enter into force on 5 October 2025, being 20 days following publication in the OJEU.