EIOPA launched a consultation on the guidelines for outsourcing to cloud service providers. The guidelines are addressed to insurance and reinsurance undertakings as well as national supervisory authorities in EU. The guidelines specify how the outsourcing provisions set forth in the Solvency II Directive (2009/138/EC), in the Delegated Regulation 2015/35, and in the EIOPA guidelines on system of governance need to be applied in case of outsourcing to cloud service providers. The consultation is open until September 30, 2019. These guidelines apply from July 01, 2020 to all cloud outsourcing arrangements entered into, or amended on or after this date.
EIOPA developed these guidelines in line with its contribution to Fintech Action Plan of EC and taking into account the outcome of its Fourth Insurtech Roundtable on the use of cloud computing by (re)insurance undertakings. The guidelines aim to provide clarification and transparency to market participants and to help avoid potential regulatory arbitrages. They also intend to foster supervisory convergence regarding the expectations and processes applicable in relation to cloud outsourcing. Annex 1 to the consultation contains the impact assessment to the guidelines whereas Annex II provides an overview of questions for consultation. The key areas covered in the guidelines include the following:
- Criteria to distinguish whether cloud services should be considered within the scope of outsourcing
- Principles and elements of governance of cloud outsourcing, including documentation requirements and list of information part of the notification to supervisory authorities
- Pre-outsourcing analysis, including materiality assessment, risk assessment, and due diligence on the service providers
- Contractual requirements
- Management of access and audit rights; security of data and systems; sub-outsourcing, monitoring, and oversight of cloud outsourcing; and exit strategies
- Principle-based instructions for national supervisory authorities on the supervision of cloud outsourcing arrangements including, where applicable, at group level
The use of cloud outsourcing is a common practice among all types of financial undertakings, not only for insurance and reinsurance undertakings. Moreover, the key associated risks are similar across sectors. Acknowledging these facts and recognizing the potential risks of regulatory fragmentation in developing these guidelines—in addition to the (re)insurance provisions on outsourcing—EIOPA also considered the most recent guidance published by EBA.
Comment Due Date: September 30, 2019
Effective Date: July 01, 2020
Keywords: Europe, EU, Insurance, Reinsurance, Guidelines, Outsourcing, Cloud Service Providers, Governance, Fintech, Insurtech, Regulatory Arbitrage, Supervisory Convergence, Cloud Outsourcing, Solvency II, EBA, EC, EIOPA
Previous ArticleBoE Issues Draft Version 3.2.0 of XBRL Taxonomy for PRA110 Reporting
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.