Ms Cristina Durante del Barrio
Associate lawyer specialized in cybersecurity

Cheng Li Yow specialises in corporate transactions for financial institutions including (re)insurers, asset managers and banks, insurance and reinsurance transactions and insurance regulatory advice.

Cheng Li advises on cross-border (re)insurance transactions, alternative risk transfer including ILS and is the co-author of the financial reinsurance and alternative risk transfer chapter of the Law of Reinsurance. She is experienced in banking and (re)insurance restructurings including through Part VII transfers and cross-border mergers, financial institutions M&A and joint ventures and bancassurance and distribution arrangements.

Ms Marta de Lorenzo Arnau
Associate lawyer specialized in insurance and pension funds

Imogen Ainsworth specialises in transactional and advisory matters across the insurance, asset management and banking sectors.

Imogen is experienced in advising on complex M&A, cross-border (re)insurance transactions, including pension risk transfer and longevity transactions, and portfolio transfers as well as joint ventures, strategic partnerships and complex corporate reorganisations.

Imogen also regularly advises on insurance regulatory matters, with a particular emphasis on prudential matters, including matching adjustment requirements, under Solvency UK and Solvency II.

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The Future of the Spanish Insurance Sector: How Cybersecurity, Artificial Intelligence, Sustainability, and Consumer Protection are driving a transformative change and shaping the industry’s evolution

As an integral part of the financial system, the insurance sector continues to face ongoing transformation due to regulatory changes aimed at adapting it to a globalized economic environment and new social and technological demands. These changes are primarily driven by a high regulatory burden that encompasses both local and European regulations, with the goal of ensuring resilience, solvency, transparency, and consumer protection.

More specifically, the main current impacts on insurance companies in Spain stem from regulations on cybersecurity, artificial intelligence, sustainability challenges and obligations, and consumer protection. Notably, changes related to accessibility, as well as complaint and claim management, stand out in consumer protection.

In January, two years after its entry into force, Regulation 2022/2554 on the digital operational resilience of the financial sector, known as the DORA Regulation, was applied. It is undoubtedly the most comprehensive and demanding regulation regarding digital security, requiring an exhaustive compliance adaptation process for insurance companies. This regulation marks a before and after in the search for a regulatory framework that protects the European sector against growing cyber threats.

Insurers must have comprehensive capabilities that enable strong and efficient management of technological risks. This approach has a significant impact on the company’s cybersecurity governance, including the new responsibilities of the board of directors. Furthermore, DORA provides obligated entities with favorable legal tools to manage the technological risks associated with external providers, as well as a well-defined internal regulatory framework that reinforces the legal security of the companies.

From the results of the “Dry Runs” to prepare for DORA conducted by the European Authorities and the self-assessment forms required by the Spanish authorities, it has been observed that, in general, entities have good governance, cybersecurity, and business continuity measures in place. However, in many cases, there is a lack of periodic reviews or follow-up of these reviews, indicating that further work is needed to ensure comprehensive management of technological risks, aligned with the standards required by DORA.

On the other hand, artificial intelligence emerges as a transformative factor, both in optimizing operational processes and in enhancing the customer experience. This requires constant adaptation by insurers to incorporate these technologies efficiently and securely. In fact, it is a sector that is pioneering the adoption of AI, even ahead of the industrial sector or public administrations. Artificial intelligence is used in various areas, such as predictive risk analysis, claims management, and product personalization, allowing companies to offer more efficient, faster, and tailored solutions to customer needs. In fact, the Regulation itself has addressed how AI systems used for risk assessment and pricing related to individuals in the case of life and health insurance are considered high-risk.

In this context, most Spanish insurers have dedicated departments focused on digitization and are currently working on AI-related projects. Many of them already have these projects embedded in their daily operations, with a focus on customer loyalty.

However, this transformation also presents challenges related to data management, privacy, and transparency in the algorithms used, which requires constant adaptation to technological advancements and proper risk management associated with their implementation. Therefore, since the AI Act came into force a few months ago, insurance companies have had to adapt to it, although it has not posed a significant challenge given that they are already accustomed to adapting their structures and processes to new regulatory changes.

One of the areas where its impact is being felt most profoundly is in the relationship between companies and their customers. Putting the customer at the center of AI means using this technology in a way that enhances the consumer experience by retaining as many customers as possible, optimizing support and response processes, and enabling unprecedented service personalization, while also preventing fraud.

Thirdly, the insurance sector is also influenced by the growing pressure to comply with the requirements arising from sustainability regulations, which present challenges and obligations that advocate for the integration of environmentally and socially responsible practices. These regulations are driving a significant shift in how insurers manage their investments, products, and services. In the European Union, environmental policies are taking a central role, driven by the Green Deal and the Green Taxonomy, which provide guidelines for companies, including insurers, to align their strategies with environmental, social, and governance (ESG) sustainability principles. Insurers must integrate these principles into their investment decisions, product design, and risk management. Additionally, the regulations impose transparency and disclosure obligations, requiring companies to demonstrate their commitment to sustainability and the environmental impacts of their operations.

As a result, Spanish insurance entities will face various regulatory obligations throughout the next year. Among other things, they will need to incorporate the evolution of sustainability risk analysis in the Financial and Solvency Position Report (ISFS), including ESG aspects related to governance, investments, and insurance products, as well as progress in complying with European and Spanish obligations. They will also need to prepare a Report on the Financial Impact Assessment of risks associated with Climate Change (which has been voluntary until now, but it is unclear whether it will remain so in 2025). They must also develop Key Underwriting Activity Indicators in line with the Taxonomy Regulation, incorporate ESG content in the Annual Risk Management Function Report and the Actuarial Function Report, develop and justify a Climate Change Risk Materiality Test model for the Entity’s investments and insurance products, and, based on those results, if there is positive materiality, prepare stress tests for investments and insurance products and incorporate ESG risk into the ORSA. Additionally, they will need to prepare a Sustainability Report.

Finally, and related to sustainability, in the field of consumer protection, the most notable changes focus on the accessibility of products and services, as well as the improvement of complaint and grievance resolution mechanisms. This approach not only aims to comply with regulations but also to ensure greater transparency, trust, and customer satisfaction, especially in an increasingly competitive and digitalized environment.

The current regulations require insurers to ensure that their products are understandable and accessible to everyone, regardless of their characteristics or abilities, including vulnerable groups such as people with disabilities or the elderly. Additionally, there is a push for greater efficiency in customer service processes, particularly regarding the management of complaints and claims. This means that insurers must have more agile and effective systems for resolving disputes, in addition to being accessible, which in turn requires increased investment in training, technologies, and the implementation of customer service processes that are transparent, quick, and satisfactor.

Despite this, many insurers are making progress in ensuring universal accessibility before the European Directive 2019/882, which has already been transposed into Spanish law, becomes applicable to both new products and service contracts, as well as to existing ones, for which a longer adaptation period is anticipated.

One of the most significant advancements in this area is digital inclusion. Through this, the aim is to ensure that anyone, regardless of their limitations, can use the tools provided by insurance companies, such as their websites or customer apps. For example, even if a person has a visual or hearing impairment, they should be able to navigate the website of the insurer with whom they wish to purchase insurance or already have an existing policy, with the highest level of accessibility guaranteed. Some of the most common examples include the use of clearer language, the incorporation of a narrator function, ensuring an appropriate font size, or even increasing the contrast between text colors to enhance readability.

In summary, in the current context where technology plays a key role in the interaction between consumers and businesses, insurance companies have the responsibility to ensure that all users, regardless of their personal circumstances, can access and use their digital platforms without difficulty. Therefore, it is expected that they will develop further advancements that eliminate digital barriers for all users. In fact, relating this to the second impact discussed (AI), it can help insurance companies adapt interfaces to the individual needs of users through machine learning, for example, by adapting virtual assistants or chatbots. In this way, the experience can be personalized, promoting equal opportunities and offering clients a broad range of options, as if a user feels uncomfortable using digital platforms alone, they should be able to access support via phone or email.

The aforementioned is linked to two highly relevant regulations for the Spanish insurance sector, which are currently in the bill stage, awaiting final approval. These regulations have the potential to generate a significant impact on the sector, and their approval will be closely monitored by insurance companies.

On one hand, one of the regulations mentioned, which is expected to be approved in 2025, has a direct impact on customer service in the insurance sector. Among other aspects, it aims to ensure that this service is free, efficient, universally accessible, inclusive, non-discriminatory, and measurable, while guaranteeing personalized attention. Therefore, insurance entities will need to ensure that their employees receive ongoing specialized training, including specific training related to vulnerable individuals, such as those with disabilities or advanced age.

As previously mentioned, insurance companies are accustomed to constantly adapting to new regulatory changes. In this context, and proactively, they have already started making their initial adjustments to comply with the new requirements, reflecting the sector’s commitment to inclusion and adherence to regulations aimed at ensuring equitable and accessible service for all customers.

A prominent example of these actions is the creation of video interpretation services for individuals with hearing impairments. These services, promoted in collaboration with specialized associations, enable customers with this disability to purchase insurance products, make inquiries related to the services and products of insurers, manage claims, or request assistance, among other task.

Finally, in relation to the aforementioned, a regulation is pending approval that will establish the creation of an Independent Administrative Authority for the Defense of the Financial Customer. Its objective is to replace the three existing sectorial complaint services (Bank of Spain, Stock Market National Commission, and Directorate General of Insurance and Pension Funds).

The creation of this new Authority will have a significant impact on banking and insurance entities, both economically, legally, reputationally, and operationally. This transformation will require a thorough analysis of current complaints to assess the potential impact it may have on Spanish insurance companies.

In conclusion, the Spanish insurance sector is undergoing a significant transformation driven by technological innovation, sustainability demands, and new regulations aimed at improving accessibility, resilience, and consumer protection. The integration of artificial intelligence is redefining the customer experience and operational efficiency, but it also presents challenges in terms of privacy, transparency, and, especially, cybersecurity.

At the same time, sustainability regulations are forcing insurers to adopt more responsible practices in their investments and products, requiring continuous efforts to meet new regulatory requirements and improve the disclosure of their environmental impacts, among other things.

On the other hand, accessibility to products and services is an increasing priority, with a particular focus on ensuring that all users, regardless of their abilities, can access and use digital platforms effectively. Digital inclusion and specialized staff training are key steps to ensure that insurers meet their responsibilities and promote equal opportunities.

The regulations currently under approval, such as those related to customer service and the creation of an Independent Administrative Authority for Financial Consumer Protection, signal profound changes that will affect both internal operations and the relationship with consumers. In summary, the insurance sector is in a constant stage of adaptation and evolution, where innovation, sustainability, and customer care combine to build a more equitable, inclusive, and transparent environment.