The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.
The statement sets out a high-level summary of the responses received from stakeholders as well as the EIOPA reactions to the stakeholder feedback. Stakeholders generally agreed on possible next steps, including the need for a coherent European approach to blockchain and smart contracts in insurance and common understanding of how existing rules should be applied in order to develop a more integrated and efficient European insurance market. Stakeholders also agreed that there is a potential for blockchain to be used by supervisors to support their supervisory review process and make it more flexible and responsive (for example, automating regulatory reporting). Furthermore, stakeholders considered that the existing regulations like Insurance Distribution Directive (IDD), Solvency II Directive, or General Data Protection Regulation (GDPR), in combination with recently launched legislative initiatives such as Markets in Crypto Assets (MiCA), Digital Operational Resilience Act (DORA), Anti-Money Laundering Directive (AMLD 5), or the Artificial Intelligence (AI) Act, would address most of the risks posed by the use of blockchain technology and smart contracts in insurance. However, stakeholders highlighted the importance of ensuring that the new legislative initiatives are sufficiently “future proof” and do not create excessive burdens to business, especially small and medium enterprises. Overregulation should be avoided keeping in mind among others broader European competitiveness vis-à-vis other jurisdictions. In this regard, regulatory sandboxes were seen as a positive development by some stakeholders.
EIOPA will consider highlighted barriers in its different work streams as appropriate. EIOPA will also aim to share highlighted barriers and challenges with the European Commission and European Data Protection Supervisor. EIOPA will continue monitoring blockchain and smart contract use cases in insurance, barriers, and related risks and benefits, including in its InsurTech Task Force. EIOPA will also continue to assess blockchain use in regtech and suptech as necessary. Potential area for further focus is Decentralized Finance (DeFi) and its extensions in insurance (DeIn). EIOPA notes that there are different types of crypto-assets use cases in the insurance industry, although their level of adoption is still at an early stage. However, EIOPA highlights the risk and speculative nature of crypto-assets as well as concerns about the environmental aspects of crypto-assets. In cooperation with the European Commission and the other European Supervisory Authorities, EIOPA will continue monitoring market and regulatory developments and, where necessary, leverage on them to adopt any measure in this area. The new Solvency II reporting framework that will enter into force in 2023 will also better capture crypto-assets related investments. As next steps, EIOPA will reflect further upon the barriers and challenges highlighted in the consultation and continue assessing the use of blockchain in supervisory and regulatory processes as necessary.
Keywords: Europe, EU, Insurance, Blockchain, Reporting, AML CFT, KYC, Crypto-Assets, Decentralized Finance, Regtech, Suptech, Insurtech, Solvency II, EIOPA
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