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 ArticleECB Paper Discusses Integration of Microdata for Policy Needs
The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.
The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.
As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.
The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.
The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.
The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.
The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.