Ireland: Insurance Regulatory Update - November 2013

Last Updated: 11 December 2013
Article by Elizabeth Bothwell and Jennifer McCarthy
Most Read Contributor in Ireland, October 2018


  • Central Bank Publishes new administrative sanctions Inquiry Guidelines and Procedure outline
  • Central Bank Publishes Slides from Industry Briefing on Solvency II Guidelines
  • National Consumer Agency Publishes levies for 2013
  • Central Bank Fines Insurance Intermediaries over Failure to Hold Professional Indemnity Insurance
  • Substantial progress on Solvency II as Quick Fix II Directive is adopted and trialogue Agreement is reached on Omnibus II
  • The Economic and Monetary Affairs Committee of the European Parliament Publishes Report on the Proposal for a Regulation on Key Information Documents for Packaged Retail Investment Products
  • Insurance Europe Comments on Proposals for a Standard of Accounting for Insurance Contracts to the International Accounting Standards Board
  • Insurance Europe Publishes Position Paper on market Access Issues regarding the Chinese and Japanese Markets
  • EIOPA Publishes a Q&A Tool for Submitting Questions on EIOPA Guidelines
  • EIOPA Launches Special Section of its Website for Consumers


Central Bank Publishes New Administrative Sanctions Inquiry Guidelines and Procedure Outline

Following its public consultation earlier this year, the Central Bank has published updated versions of the Outline of the Administrative Sanctions Procedure (the Outline) and Inquiry Guidelines (the Guidelines). These replace the Outline of Administrative Sanctions Procedure, and repeal and replace the Guidelines to Administrative Sanctions Procedure, previously published by the Central Bank in 2005. Both the Guidelines and the Outline caution that it may be necessary to depart from the procedures outlined depending on the circumstances of the case.

The Outline describes the procedures by which the Central Bank will investigate suspected prescribed contraventions by regulated entities. It also includes a detailed description of how investigations and settlement procedures will work. The appendix to the Outline sets out a sample public statement that the Central Bank will issue after it enters into a settlement agreement.

Interestingly, the Outline includes a new concept - the Early Settlement Discount Scheme (the Scheme). Under the Scheme, the Central Bank may allow a discount of up to 30% of the full sanction amount where the regulated entity confirms its willingness to enter into a settlement agreement within the time frame indicated by the Central Bank in the letter that it will issue offering the possibility of settlement (the Settlement Letter). If the regulated entity does not confirm its willingness to enter into settlement within the stipulated timeframe but subsequently confirms its willingness to settle, the Central Bank may offer a discount of up to 10% of the full sanction amount (provided that confirmation occurs prior to the point at which the Central Bank issues a full inquiry letter (known as a Notice of Inquiry)). Once the Central Bank issues a Notice of Inquiry, the Scheme can no longer apply.

The Guidelines outline the procedures to be followed by the Central Bank when holding an inquiry when it suspects a prescribed contravention has been committed. The updated Guidelines provide significant detail in terms of the practices and procedures to be adopted during an inquiry, in particular referring a suspected contravention to inquiry, the preliminary inquiry procedures, the inquiry hearing, and the findings of the inquiry members. Under the Guidelines, a regulated entity suspected of a prescribed contravention can expect to receive a Notice of Inquiry together with an Inquiry Questionnaire 25 working days before the date of the inquiry. It will have a minimum of 10 working days to complete the Inquiry Questionnaire and return it to the Regulatory Decisions Unit of the Central Bank. The appendices to the Guidelines also set out useful illustrations of the preliminary inquiry procedure and order of inquiry hearing proceedings (both with and without oral evidence).

A link to the Outline is here.

A link to the Guidelines is here.

Central Bank Publishes Slides from Industry Briefing on Solvency II Guidelines

On 25 November the Central Bank published slides from an Industry Briefing on its recently published Guidelines (the Guidelines) on preparing for Solvency II (the Slides). Solvency II is due to be implemented on 1 January 2016 and transposed on 31 March 2015. In the Slides, the Central Bank explained that the Guidelines will apply to all firms except those excluded by the Solvency II Directive or the Omnibus II transitional provisions. The Slides also provide a general update on Solvency II, Omnibus II and the part played by EIOPA in the process. The content of the CBI's four sets of Guidelines – system of governance, forward looking assessment of own risks (FLAOR), submission of information and internal models is set out.

The Central Bank cautioned that the Guidelines should not be viewed in isolation. Firms should continue to be cognisant of existing requirements including the Fitness and Probity regime, Corporate Governance Code and Solvency I regulations. Also, emerging requirements will apply following the current Central Bank consultation paper on Reserving and Pricing Requirements for Non-Life Insurers and Reinsurers, and the recent Central Bank consultation paper on proposed revisions to the Corporate Governance Code. The Central Bank's approach to supervising the application of the Guidelines is also set out together with a detailed summary of the system of governance and FLAOR (including guidance on the FLAOR supervisory report requirement). The Central Bank has also given a high level overview of the requirements set out in EIOPA's Preparatory Guidelines regarding the nature of submission of information to NCAs such as the Central Bank (which requirements apply to high and medium high impact firms under PRISM only).

High and medium-high impact firms under PRISM will be subject to all of the relevant guidelines from 2014, whilst the requirements will be phased in for low and medium-low firms i.e. the general requirements of the Guidelines will apply from 2014, the Establishment of Key Functions and "related guidelines" (5, 14, 32-34 and 35-40) will apply from 2015.

In relation to the Guidelines on pre-application for internal models, the Central Bank indicated that these are based on the EIOPA Guidelines and apply to all types of entity in the pre-application process (solo/group/full/ partial IM). It highlights two noteworthy changes since the EIOPA Consultation Process, namely that undertakings should submit information on the solvency capital requirement (SCR) calculated both with the standard formula and with the full/partial internal model and that the standard formula information should cover overall SCR and the following risk categories (if in scope): market risk, counterparty default risk, life underwriting risk, health underwriting risk, non-life underwriting risk, non-life catastrophe risk, and operation risk. The Slides also include a helpful timetable for Solvency II from February 2014 to January 2016. Any queries can be addressed to the Central Bank at EIOPA has published a Solvency II Q&A and it appears from the Slides that the Central Bank will publish its own set of FAQs shortly. Any Central Bank FAQs will be covered in a future Insurance Regulatory Update once they have been published.

A link to the Slides is here.

National Consumer Agency Publishes Levies

On 1 November the Consumer Protection Act 2007 (National Consumer Agency) Levy Regulations 2013 (the Regulations), which were made on 29 October, were published. The Regulations amend the levy amounts payable by financial service providers to the National Consumer Agency (NCA) to fund the provision of information to consumers of financial services in 2013.

The Schedule to the Regulations outlines the levies payable by firms. The NCA has adopted the same categorisation of financial service providers that is used by the Central Bank for authorisation, although it is not imposing levies on all categories. The total amount of the levy to be collected in 2013 is €2,578,400 (which is a reduction of 2.8% compared to the NCA's requirements for 2012).

Life insurance companies will contribute 11.42% to the overall levy while 22.55% will be collected from non-life insurance companies (other than captives). The levies are calculated on the basis of the insurer's total net premium income written on Irish risk business for the year ending 31 December 2011 as stated in the Central Bank's insurance statistics 2011. A levy of 0.00348% for life assurance and 0.02135% for non-life insurance will be collected, subject to a minimum levy of €500 for each insurer.

A link to the Regulations is here.

A link to the NCA's 2013 Guide to the NCA Levy can be accessed via this link.

Central Bank Fines Insurance Intermediaries over Failure to Hold Professional Indemnity Insurance

On 25 November the Central Bank entered into settlement arrangements with six insurance intermediaries over failure to hold professional indemnity insurance (PPI). The settlements, under which monetary penalties were payable, followed a review carried out by the Consumer Protection Directorate of the intermediaries' annual online returns. Insurance intermediaries are required to hold PPI under the European Communities (Insurance Mediation) Regulations 2005. The Central Bank has reminded intermediaries that it views non-compliance with the requirement to hold PPI as a serious matter.


Progress on Solvency II – European Parliament adopts directive to amend Solvency II transposition dates and Trialogue agreement is reached on Omnibus II

There has been significant progress on the Solvency II initiative this month. On 22 November, the European Parliament confirmed that, on 21 November, it had adopted a "Quick Fix" Directive and the provisional text of that Directive, as adopted, was published on 1 December 2013. The Solvency II Directive must, once the "Quick Fix" Directive is published in the Official Journal, be transposed by Member States no later than 31 March 2015 and be implemented by 1 January 2016.

On 13 November the Parliament, the European Commission and Council of the EU reached agreement on the proposed Omnibus II Directive. The agreement will enable the coming into force of the Solvency II Directive (2009/138/EC). The Parliament currently intends to vote on the Omnibus II Directive at its plenary session to be held from 24-27 February 2014.

Economic and Monetary Affairs Committee of the European Parliament (ECON) Publishes Report on the Proposal for a Regulation on Key Information Documents (KIDs) for Packaged Retail Investment Products

On 7 November ECON published a report in respect of the Commission's proposal for a Regulation on KIDs for packaged retail investment products. The report includes a draft legislative resolution for the Parliament with proposed amendments to the draft Regulation. ECON's suggested changes include:

  1. extending the scope of the Regulation to all savings and investment products, not just "packaged" investments;
  2. including supplementary information on the local tax regime applicable to the investment product in the KID due to the importance of being able to compare one investment product with others;
  3. requiring indicative future performance scenarios based on a multifactor analysis (such as counterparty risks) rather than risk indicators based on the track record of past performance;
  4. aligning the KID insofar as possible with the KID for UCITS funds. (In September's issue of the Insurance Regulatory Update, we reported that research carried out by the Association of British Insurers found that while the form of the KID used for UCITS was a good starting point, it would need to be tailored to be fit for purpose with packaged retail investment products); and
  5. strengthening the powers of European Supervisory Authorities so that, on request, they can be provided with all necessary information to assess compliance with the Regulation and ensure the protection of clients and investors in financial markets.

ECON also noted that information on the impact of the investment product with respect to environmental, social and governance criteria is an essential consideration for retail investors when making investment decisions.

A link to the report is here.

On 20 November, the Parliament adopted certain amendments to the Regulation to enable negotiations to be progressed with the EU Council, but it postponed a vote on the ECON proposals and has referred them back to ECON for reconsideration. A link to the text as approved by Parliament on 20 November is available here.

Insurance Europe Comments on Proposal for a Standard of Accounting for Insurance Contracts

On 28 October Insurance Europe welcomed the International Accounting Standards Board's (IASB) revised proposals to account for insurance contracts (IFRS 4 Phase II). The current interim standard for valuing insurance contracts is IFRS 4 which was introduced in 2004 so that European insurers could be IFRS compliant for their consolidated accounts. Insurance Europe welcomed the progress made in IFRS 4 Phase II and specifically commended certain features of the revised proposals such as the recognition of the importance of an appropriate discount rate, the introduction of another comprehensive income model for changes in market interest rates on both insurance liabilities and related assets, the unlocking of the contractual service margin and the amended transition principles. However, in its comments sent to IASB, Insurance Europe set out additional changes which it believes are necessary to reach the goal of the creation of a single global accounting standard. Insurance Europe drew specific attention to the importance of asset-liability management to insurance businesses and the need for IASB to recognise the link between insurance liabilities and related assets for the purpose of reporting performance. IASB aims to finalise IFRS 4 Phase II by the end of 2014.

A link to the press release is here.

Insurance Europe Publishes Position Paper on Market Access Issues in China and Japan

On 31 October Insurance Europe published two position papers to draw attention to market access issues for European insurers with respect to China and Japan. While both countries are of upmost importance to the European insurance industry, relationships could be improved further with the removal of certain trading barriers. In respect of China, it focused on 12 key areas in which restrictions for foreign insurance companies could be eased to improve access. Restrictions mentioned include complicated procedures for converting (incorporating) foreign property and casualty insurance branches into subsidiaries, licence restrictions on foreign brokers and requirements to get the prior approval of the Chinese Insurance Regulatory Commission to related party transactions with a foreign-invested insurance company (while no such requirement applies to a domestic insurer's related party transactions).

With regards to Japan, Insurance Europe noted the Japanese Government's commitment to establish a 'more level playing field' between state owned insurers and foreign insurers but pointed out that there are still sectors of the Japanese insurance market which are biased in favour of certain domestic insurance providers with regard to tax treatment, compliance and supervision.

Links to the press releases are here and here.

EIOPA Publishes a Q&A Tool for Submitting Questions on EIOPA Guidelines

On 31 October EIOPA published a Q&A tool for financial institutions, supervisors or other stakeholders to submit questions on EIOPA Guidelines. This tool allows users to submit queries regarding its Guidelines on Complaints Handling in Respect of Insurance Undertakings, System of Governance, Forward Looking Assessment of Own Risks, Submission of Information to NCAs and Pre-Application for Internal Models. EIOPA will publish the responses to queries received in this section of its website.

EIOPA Launches Special Section of its Website for Consumers

On 11 November EIOPA announced that it had launched a Consumer Lounge on its website. Its overall purpose is to promote transparency in consumer financial products and services. Specifically, the Consumer Lounge is aimed at providing consumers with helpful information regarding financial markets by setting out the risks and attributes of various financial products (e.g. variable annuities, payment protection insurance and defined contribution pension schemes). The Consumer Lounge also provides consumers with links to further national and European consumer organisations which can provide them information on financial products/services.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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