EU audit reform: the impact for insurers

Insurers and reinsurers need to prepare for changes to the audit regime applying from June 2016.  In particular, requirements for the mandatory rotation of auditors will need to be planned for.  Other changes to the current regime are substantial, including tighter restrictions on non-audit services that can be provided by an auditor to an audit client and an overall limit on fees for those services.  EU legislation, in the form of a Regulation and Directive, was published in the Official Journal of the European Union on 27 May 2014.  Most of the changes will come into force in June 2016, although transitional provisions aim to allow the audit market to operate without too much disruption.  The legislation derives from a mixture of concerns relating to the audit market and audit process which were highlighted during the financial crisis, particularly in relation to banks.  As with many other reforms coming out of the crisis, they have been carried across to the insurance sector. 

Unfortunately, considerable uncertainty remains about how the new legislation will apply in practice, not least because a number of Member State options, which may lead to different regimes applying across the EU, await decisions by national governments.  To read our briefing, click here.