Featured Product

    EIOPA Seeks Feedback on Approach to Blockchain and Smart Contracts

    April 29, 2021

    EIOPA published a discussion paper on uses cases of, and the European approach to, blockchain and smart contracts in the insurance sector. EIOPA seeks stakeholder feedback, by July 29, 2021, to all parts of the discussion paper, covering blockchain, smart contracts, and crypto assets use cases in insurance, related risks and benefits, regulatory barriers, and a possible European approach to blockchain and smart contracts in insurance. The paper also offers an overview of findings of the feedback received from national competent authorities, through the survey on blockchain and smart contracts in insurance in the second quarter of 2020. EIOPA will assess the feedback received to better understand and address blockchain-related challenges and developments in the insurance sector.

    In the discussion paper, EIOPA notes that blockchain could provide opportunities for both prudential and conduct supervisors (suptech) as well as facilitate regtech solutions. The combination of smart contracts and blockchain could help to automate regulatory reporting and make it more efficient and transparent, improve consistency and data quality across firms, and allow regulators to get data on new areas of interest or to gain real-time access to signed contracts and the information they contain (real-time regulatory monitoring). As blockchain technology is still evolving, several challenges are emerging, such as the complexity of the technology, data protection and privacy, cyber risk, integration with legacy infrastructures, or interoperability and standardization between different blockchains. 

    The paper notes that potential risks posed by blockchain also include lack of knowledge on blockchain as well as governance challenges, especially due to potentially high dependency on external platforms and IT suppliers. In addition, insurance undertakings could face compliance risks, namely with the prudent person principle included under Article 132 Solvency II, since it can be challenging for insurance undertakings to properly identify, measure, manage, and control the risks of several types of crypto assets. Additionally, the accounting treatment of different types of crypto assets may require further clarification, considering that diverse accounting practices could give rise to different capital requirements under Solvency II. Based on blockchain types and platforms chosen, performance scalability challenges could arise as well. Concerns about the legal status of smart contracts also have been aired.

    Although the current regulatory and supervisory framework can be considered mostly effective to address emerging risks, specific issues should be considered, based on the evolution of the technology and its uses in business processes. It is also important to ensure appropriate understanding by insurance undertakings and supervisors as well as proportionate governance policies and processes, to guarantee that all relevant risks are identified and properly managed.  Given the wide range of applications and the early stage of adoption of blockchain in the insurance industry, most jurisdictions are still exploring policy and supervisory responses. This can cause legal uncertainty and act as barrier to the use of blockchain and smart contracts in insurance and could also lead to divergent regulatory and supervisory practices and different levels of consumer protection across EU. Hence, a general European harmonized approach to blockchain could promote and facilitate the sound scaling of blockchain and smart contracts, including in the insurance context.

    To this end, EIOPA will assess the feedback to this discussion paper to better understand blockchain developments in the insurance sector as well as the risks and benefits related to them. This could also help to provide informed input for the upcoming legislative initiatives foreseen in the EC Digital Finance Strategy. It could also supplement the overall work of EIOPA on digitalization, including in areas such as insurance and reinsurance value chain and new business models arising from digitalization, insurance platforms, and ecosystems, open insurance, digital ethics, and regtech/suptech.


    Related Links

    Comment Due Date: July 29, 2021

    Keywords: Europe, EU, Insurance, Blockchain, Suptech, Regtech, KYC, Artificial Intelligence, Smart Contracts, Crypto Assets, Solvency II, Regulatory Capital, EIOPA

    Featured Experts
    Related Articles

    BIS Paper Studies Impact of Fintech Lending on Small Businesses in US

    The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.

    September 26, 2022 WebPage Regulatory News

    UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks

    The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).

    September 26, 2022 WebPage Regulatory News

    EBA Launches EU-Wide Transparency Exercise in 2022

    The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.

    September 23, 2022 WebPage Regulatory News

    SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks

    The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."

    September 22, 2022 WebPage Regulatory News

    EC Rule Lists Advanced Economies for Market Risk Capital Calculations

    The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.

    September 21, 2022 WebPage Regulatory News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8521