Insurance

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Supervision of Insurers

The insurance supervision directorate of the Central Bank is responsible for prudential supervision of insurance and reinsurance undertakings which are authorised in Ireland. It monitors the risks posed by the undertakings stop it issues standards policies and guidance which undertakings are required to meet. The EU legislation comprises the principal directive together with a range of EU implementing directives.

The EU solvency II regime commenced in 2016. It sets out the framework for requirements around capital governance and risk management in EU authorised insurance and reinsurance undertakings. It introduces increased regulatory reporting requirements for public disclosure requirements.

The new framework applies to most insurers and reinsurance. A smaller number of insurance and reinsurance companies in one-off are not subject to these rules.

There are common rules regarding the format and structure for disclosure of information. There is detailed guidance on European and national regulation.

There are several dozen guidance and policy notes relevant to insurance and reinsurance. The Central Bank bases its requirements and guidance on international best practice, recommendations issued by the relevant oversight bodies in particular European insurance and occupational pensions authority, the IMF and the International Association of insurance supervisors. National authorities are to endeavour to comply with the EIOPA guidelines.

Authorisation

There is detailed guidance on applications for authorisation. As with other significant financial services authorisation applications, prior contact and discussion with the Central Bank are highly desirable. The relevant guidance will enable the insurer to consider what type of authorisation is required by the applicant’s business model and whether it is capable of meeting the regulatory requirements. Once the relevant to requirements have been considered, an initial meeting should be undertaken with the Central Bank.

Applications are considered with reference to criteria in a range of areas

of the legislation including

  • legal structure
  • ownership structure
  • overview of group
  • scheme of operations
  • system of governance
  • risk management personnel
  • fitness and probity of key personnel
  • risk management system
  • own risk consultancy assessment
  • financial information projections
  • consumer compliance issues

The length of time required to complete the application process will depend on

  • the quality of the application
  • its complexity
  • time taken to respond to comments and requirements
  • changes arising during the authorisation period
  • time is taken by third party authorities to respond

An authorisation in principle may issue. The applicant must address issues such as the introduction of capital appointment of directors, finalisation of objects and other terms and conditions within a period. Once the preconditions and pre-authorisation requirements have complied with the authorisation issues. he Central Bank maintains a register of undertakings and reinsurance undertakings.

Ongoing Supervision

Ongoing supervision is in accordance with the Central Banks risk-based framework for the supervision of regulated firms. Probity requirements apply to directors and senior managers. The must have the requisite skills and experience to perform their role and tasks. The must comply fit and proper requirements applicable under the regulations. Notification to Central Bank is required for approval of key position holders.

The Central Bank has published guidance on corporate governance requirements for insurance undertakings. Undertakings must have the relevant systems and policies to mitigate risk and monitor compliance with their internal policies. The Central Bank undertakes oversight of the insurer’s corporate governance risk management and internal control procedures.

A number of important consumer protection codes apply with reference to insurance. The consumer protection code applies to many key aspects of the provision of insurance to consumers in Ireland. The minimum competency code sets out minimum professional standards for persons providing financial services including insurance services.

Reporting

There are ongoing financial and other reporting obligations. Quarterly solvency reporting in accordance with a specified template is required. Undertakings must submit a solvency and financial condition report annually and disclose publicly.

Undertakes must submit a regular supervisory report at yearly intervals. There may be required to submit them more frequently.

Undertakings must submit the own risk consultancy assessment on an annual basis. The requirements are defined in detail and legislation. Lesser obligations apply to low and medium low undertakings.

Undertakings are obliged to notify the Central Bank of certain defined events in accordance with the EIOPA guidelines on reporting and public disclosure. They must also disclose events which could reasonably lead to or already have led to material changes in the undertaking’s business and performance, the system of governance, risk profile, solvency or financial position.

Where relevant in accordance with the EIOPA guidelines undertakings and groups within the guidelines must submit returns on a quarterly semi-annual or annual basis. Undertakings using an internal model are required to submit in accordance with an internal model structure template.

The Central Bank also collect statistical information on behalf of the European Central Bank.

Auditor’s Obligations

There are obligations of the auditor to make statutory confirmations to the Central Bank. This is a confirmation that there is no matter not already reported in writing to the Central Bank by the auditor that has come to the attention of the auditor in the ordinary course of business gives rise to a duty to report to the Central Bank.

The auditors must make a report to the Central Bank stating whether or not circumstances have arisen that required the auditor to report a matter of the Central Bank under a prescribed enactment. They must describe the circumstances where applicable.

This is an annual requirement and the Central Bank should receive such reports every year from the external auditor. The auditor’s report to management must be filed with the Central Bank.

Changes in the undertakings ownership management of the business must be notified and approved by the Central Bank.

Fund

Insurers are obliged to subscribe to the insurance compensation fund. The 2% levy of aggregate gross premiums received by the insurer or insurer authorised in another state in respect of policies issued in respect of risks in the state (Ireland) applies. The fund is primarily designed to facilitate payment policyholders in relation to risks in Ireland where an Irish authorised nonlife insurer or certain other nonlife insurers authorised in another state, go into liquidation.