CUBE RegNews: 7th November

A selected summary of key developments for regulated financial institutions

Greg Kilminster

Greg Kilminster

Head of Product - Content

Macro, market, and cyber risk remain high for insurers

The European Insurance and Occupational Pensions Authority (EIOPA) has published its November 2023 Insurance Risk Dashboard, which shows that insurers’ exposures to macro, market and cyber risks are currently at a high level and the main concern for the sector. Risk levels for the remaining risk categories are constant at medium levels. The dashboard shows: 

  • Overall risk for European insurance is elevated, with the top three risks being macro, market, and cyber. 
  • Macro-related risks are high due to the deteriorating outlook for global GDP growth and widening credit-to-GDP gap. 
  • Market risks are prominent due to increased volatility in equity and bond markets. 
  • Cyber risks are also high and expected to increase further. 
  • Other risk categories, such as credit, liquidity and funding, profitability and solvency, interlinkages and imbalances, and insurance risks, are moderate. 
  • ESG related risks are stable at medium level, while digitalisation and cyber risks have increased to high levels. 

 Insurance professionals in compliance and risk management must remain vigilant in addressing these challenges to ensure the industry’s continued stability and resilience in the face of evolving risks. 

Click here to read the full RegInsight on CUBE’s RegPlatform

ASIC: Greenwashing remains a priority

In an article first published in Company Director magazine, Australian Securities and Investments Commission (ASIC) Deputy Chair Sarah Court has underlined that greenwashing is nothing but misleading and deceptive conduct in the financial industry. The article reminds readers that ASIC remains resolute in its commitment to safeguard Australians from financial harm and preserve the integrity of the country’s financial system. 

In a bid to uphold this commitment, ASIC introduced its 2023 enforcement priorities last year, with a key focus on addressing the proliferation of sustainability-related products and greenwashing practices. As entities flooded the market with ‘green’ offerings to meet consumer demand, ASIC’s enforcement efforts intensified. 

ASIC’s approach to tackling greenwashing includes a range of enforcement actions, from issuing warning letters and infringement notices to obtaining undertakings and pursuing civil penalty proceedings in the Federal Court. The regulator selects cases that are likely to have a broader impact, sending a clear message of compliance to the financial sector. 

The current greenwashing matters pursued by ASIC all allege misleading and deceptive conduct, an area where regulatory scrutiny has heightened. Court stresses in the article that verifying statements made when promoting financial products or services has always been crucial. 

In February of this year, ASIC launched its first Federal Court action against Mercer Superannuation (Australia) Ltd, accusing the company of making misleading statements regarding the sustainable nature of its Sustainable Plus investment options. This was followed by proceedings against Vanguard Investments Australia in July, where misleading conduct claims were raised regarding certain ESG exclusionary screens applied to Vanguard fund investments. 

In August, ASIC lodged proceedings against LGSS Pty Ltd (Active Super), alleging that the company made ESG misrepresentations on its website and disclosure documents, as well as on its social media platforms. 

Looking forward, ASIC’s focus is likely to expand beyond misleading and deceptive conduct to encompass license obligations, director and officer duties, and other responsibilities. Key areas of interest will include: 

  • Net zero statements and targets 
  • The use of terms such as ‘carbon neutral,’ ‘clean,’ or ‘green’ 
  • The scope and application of investment exclusions and screens 

 The article acknowledges that many entities are genuinely striving towards net zero or carbon-neutral positions. However, when aspirational environmental claims are used in marketing campaigns to attract investment or promote products without substantial evidence, ASIC will scrutinise these assertions closely. 

To assist the industry, ASIC has published guidance on how to avoid greenwashing and provided a summary of the issues identified through its surveillance efforts in this area. Despite the impending introduction of new climate reporting laws, ASIC’s focus will continue to remain on existing regulations. 

The message of the article is clear: greenwashing will remain a top priority for ASIC in the years to come. 

Click here to read the full RegInsight on CUBE’s RegPlatform

First proceedings commence for failure to comply with complaints timeline

ASIC, the Australian Securities and Investments Commission, has initiated civil penalty proceedings in the Federal Court against Telstra Super, marking the first case under a regime that began on October 5, 2021 which enforces certain provisions of ASIC’s Regulatory Guide for Internal Dispute Resolution (RG 271), including the requirement to respond to most superannuation complaints within 45 days. 

ASIC alleges that during the relevant period, 40% of Telstra Super’s responses to complainants did not comply with its internal dispute resolution procedures. This includes 106 complainants who were not responded to within the 45-day timeframe. 

Between October 22, 2021, and January 13, 2023, Telstra Super received 337 superannuation complaints but failed to meet notification requirements. This failure includes not responding to 106 complainants within the specified time, not informing 85 complainants about the delay in response, and not notifying 22 complainants about their right to take their complaint to the Australian Financial Complaints Authority. 

ASIC is seeking declarations, financial penalties, and other orders against Telstra Super in response to these alleged failures in internal dispute resolution. 

Click here to read the full RegInsight on CUBE’s RegPlatform