BaFin published the September edition of its BaFin Journal, which contains expert articles, interviews, and reports on key national and international supervisory issues as well as official announcements by the Directorate of Insurance Supervision. The key expert articles this month covered topics such as the scope of application of insurance-based investment products, robo-advice, extended field testing of insurance capital standard (ICS), and internal models for Solvency II.
Insurance-based investment products and the scope of application on the German market. With the second Markets in Financial Instruments Directive (MiFID II), the Insurance Distribution Directive (IDD), and the regulation on key information documents for packaged retail and insurance-based investment products (PRIIPs), European legislators have introduced a new technical term to insurance law—that is, the insurance-based investment product or IBIP. This introduction takes account of the fact that life insurance contracts not only serve to cover biometric risks but frequently also contain an investment component, associated with risks and opportunities, which is intended to offer a value to policyholders in the events of both death and survival.
Robo-advice, an automated investment advice in supervisory practice. The automated distribution of financial instruments and similar digital services—also known as robo-advice—generally meet the definition of investment advice. This article is intended to help providers assess whether they meet the definition of investment advice. The article follows this standard procedure based on the three typical steps of "exploration," "recommendation," and "content of the recommendation"; it also explains the definition of investment advice using practical examples.
International insurance groups: Publication of extended field testing of global capital standard. IAIS has been conducting field testing exercises once a year since 2015 to test various parameters of the planned capital standard. IAIS published the first version of the standard to be tested in extended field testing (insurance capital standard or ICS Version 1.0 for extended field testing). It hopes that this will provide helpful information and suggestions for the further development of ICS Version 2.0. The standard is to be finalized by the end of 2019 and is expected to be implemented internationally from 2020 onward.
Frank Grund’s views on internal models. One of the most substantial new developments under Solvency II is that undertakings can decide whether they determine their solvency capital requirements using the standard formula or—with BaFin's approval—the internal models. This article highlights the views of Frank Grund, Chief Executive Director at BaFin; he explains the advantages of internal models, the challenges associated with them, and his expectations regarding internal models.
Keywords: Europe, Germany, Insurance, Solvency II, Internal Models, ICS, Investment Advice, Expert Articles, MiFID II, IBIP, BaFin
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APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.
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ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.
OSFI published the key findings of a study on third-party risk management.
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