Introduction
Welcome to our insurance updater. We will highlight key legislative and regulatory developments. We will also review court judgments and insurance market publications that are likely to be of interest to you.
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EIOPA paper on third country equivalence measures under Solvency II
On 14 June 2012, the European Insurance and Occupational Pensions Authority (EIOPA) published a paper on third country equivalence measures under the Solvency II Directive. The paper provides information on equivalence transitional measures, proposed under the draft Omnibus II Directive and explains work EIOPA is currently undertaking further to the European Commission’s request for technical input in February 2012.
The Commission has developed a transitional regime for Solvency II equivalence for third countries which either have a risk based regime similar to Solvency II or are willing and committed to move towards such a regime over a pre-defined period (5 years in the Commission’s initial proposal). For those third countries that have indicated that they are interested in being covered by the transitional provisions, the Commission has requested that EIOPA carry out an analysis including:
- Whether persons working for, or on behalf of, the supervisory authorities are bound by obligations of professional secrecy. Professional secrecy equivalence is a prerequisite to inclusion in a transitional regime.
- The main areas where the equivalence criteria would currently not be met.
To date, Australia, Chile, China, Hong Kong, Israel, Mexico, Singapore and South Africa have expressed an interest in being covered by the transitional provisions, and have received requests for information to enable EIOPA to carry out a Solvency II gap analysis. EIOPA has confirmed that its advice to the Commission will be based largely on the responses provided by these third countries to its questionnaire for equivalence gap analysis. The questionnaire was published as an annex to the paper. Following the adoption of the Omnibus II Directive, EIOPA expects to launch a call for evidence inviting any interested parties to provide input on the factors they think may be relevant to its gap analysis or professional secrecy equivalence assessment.
EIOPA stresses that its work is of a technical nature only and it will be up to the Commission to decide which third countries will be included in the equivalence transitional regime. The paper indicates that the Commission’s decisions will most likely be taken in mid-2013 under the working assumption that the Solvency II regime will be applied by EU firms from 1 January 2014.
For further information: Solvency II - Equivalence Transitionals measure
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Government confirms exceptions to the ban on age discrimination
On 13 June 2012, the Government Equalities Office (GEO) published its response to the consultation on specific exceptions to the age discrimination ban under the Equality Act 2010. Age discrimination in the provision of services is banned under the Act. The ban was originally intended to come into force in April 2012, however, having consulted on the proposed exceptions the Government announced that the ban will be introduced on 1 October 2012. The consultation, launched on 3 March 2011, proposed a broad exception for financial services allowing insurers to continue to use age as a factor when assessing risk and deciding on product prices. Market practices such as age banding and age limits will continue to be permitted as the Government considers such practices are beneficial to consumers. However, any assessment of risk must, so far as it involves a consideration of age, be based on relevant information from a source on which it is reasonable to rely.
A summary of responses to the consultation and the Government’s feedback on these is contained in Chapter 4 of the response paper. The financial services exception received the greatest number of comments; however, despite the concerns raised by some, the Government concludes that there is insufficient evidence of harmful age discrimination in this sector to justify increased legislative intervention. The Government has, therefore, decided to proceed with the exception as proposed. In response to some of the points raised in the consultation, the exception will be redrafted to improve its clarity. Should further clarification be required, this will be addressed in the guidance to be published ahead of the Equality Act 2010 (Age Exceptions Order) 2012 coming into force on 1 October 2012. A revised draft of the Order, which includes the financial services exception in Article 3, is set out in Annex 1A of the response paper.
The Government considers that voluntary measures, rather than legislative intervention, are a more effective and efficient way of improving access to, and understanding, of the insurance industry. In light of this the consultation proposed two voluntary industry-operated schemes. Firstly, in order to improve transparency so that consumers can be confident that age is not being misused, the Association of British Insurers (ABI) will publish a report collating data to show how age affects insurance premiums. The second scheme aims to improve accessibility of products by expanding the signposting system currently provided by the British Insurance Brokers Association (BIBA) to include members of the ABI. Under the scheme, a provider who cannot assist an older person because of their age will refer that person to a dedicated signposting service to help them find a provider that is able to meet their needs. The ABI and BIBA began operating these transparency and signposting schemes in April 2012, and will be kept under review by the Government.
The response paper states that the draft Order, together with guidance, is likely to be laid before Parliament in the summer, therefore allowing sufficient time before the provisions come into force in October 2012. The Government has confirmed its intention to review the age discrimination ban in 2015, as part of its overall evaluation of the Equality Act.
For further information: Equality Act 2010: Banning age discrimination in services, public functions and associations Government response to the consultation on exceptions
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