Ireland: Insurance Regulatory Update - November 2014

Last Updated: 15 December 2014
Article by Elizabeth Bothwell and Jennifer McCarthy
Most Read Contributor in Ireland, October 2018




Central Bank Publishes Fitness And Probity Standards 2014

On 3 November, the Fitness and Probity Standards 2014 (the 2014 Standards) were published. The 2014 Standards supplement/amend the Fitness and Probity Standards 2011 (the 2011 Standards). The Central Bank has also introduced revised Guidance on Fitness and Probity Standards and a new Fitness and Probity FAQ document which provide some additional information.

The 2011 Standards have been amended in two ways. Firstly, the 2011 Standards have been amended in recognition of the change introduced by the European Single Supervisory Mechanism. The European Single Supervisory Mechanism was implemented at a European level in order to ensure the safety and soundness of the European banking system and requires the regulated financial service provider to notify the European Central Bank of the appointment of a person performing a pre-approval controlled function (PCF) to the management board of "significant credit institutions". Secondly, the 2014 Standards reflect the clarified position in relation to certified persons under the Investment Intermediaries Act, 1995 in the context of the outsourcing exemption that can apply when PCFs or controlled functions are outsourced to a regulated financial service provider.

A link to the Fitness and Probity Standards 2014 is here.

A link to the Guidance on Fitness and Probity Standards is here.

A link to the Fitness and Probity Standards FAQ document is here.

Central Bank Publishes Updated Requirements For Reinsurance Undertakings

In November, the Central Bank published updated versions of the (1) Requirements for Non-Life Reinsurance Undertakings (2) Requirements for Life Reinsurance Undertakings and (3) Requirements for Composite Reinsurance Undertakings (the Requirements). The updates replace the previous requirements which were published in 2012. The Requirements note the changes to the minimum guarantee fund for all reinsurers (except captives) effective from 31 December 2014. The Requirements set out further detail regarding the submission of annual forms, in particular on ceding commission and other operating expenses on the P&L form. The Central Bank also highlights its view that providing loans for activities not directly related to the reinsurance business of a reinsurer is not consistent with a firm's authorisation. Also, it is noted that the format of the compliance statement is now housed in the 'Guideline for Life Insurance Undertakings, Non-Life Insurance Undertakings and Reinsurance Undertakings - Compliance Statements'.

A Link to the Requirements is here.

Central Bank Publishes Consultation Paper On The Use Of National Specific Templates For Solvency II

On 6 November, the Central Bank published a Consultation Paper on the use of National Specific Templates (NSTs) for insurers and reinsurers under Solvency II. In the Consultation Paper, the Central Bank notes that it considers it necessary to issue NSTs arising first from the specific nature of certain insurance undertakings supervised in Ireland (eg certain hub and spoke operations) and secondly, particular products in which Central Bank-supervised insurers dominate (eg variable annuity business). The proposed NSTs include the provision of information on income statements for life and non-life firms and technical provisions and insurance claims information for non-life firms. It is proposed that the NSTs will apply to insurers categorised as High and Medium High impact under PRISM, to groups of which the Central Bank will be the group supervisor under Solvency II and to undertakings which transact variable annuity business and will, for the most part, be submitted to the Central Bank on a quarterly and annual basis via the Online Reporting System. The Central Bank is inviting industry stakeholders to make their submissions on the Consultation Paper by 9 January 2015.

A link to the Consultation Paper is here.

Department Of Finance Begins Public Consultation On Solvency II

On 20 November, the Department of Finance (the Department) issued a Consultation Paper (the Paper) on Solvency II. The purpose of the Paper is to encourage submissions to the Department on the transposition of Directive 2009/138/EC (Solvency II). The consultation will inform the Department's policy position on the legislative provisions of Solvency II, in relation to four provisions where the Department has discretion as to whether or not to apply them in national legislation. The Paper invites submissions on the following: (1) the option in Solvency II which would require that the use of a Volatility Adjustment by firms be subject to supervisory approval; (2) the implementation of an obligation requiring branch insurance undertakings writing life assurance with a head office outside the community to submit systemic notification of technical bases used for calculating scales of premiums and technical provisions; (3) the option to have a cooling off period for policy holders who have purchased individual life insurance; and (4) aspects of the calculation of the group solvency calculation of group undertakings and where the Central Bank is group supervisor. The consultation also affords stakeholders an opportunity to raise any other issues which need to be addressed in connection with the transposition of Solvency II.

The consultation will close on 21 December 2014.

A link to the Paper is here.

Central Bank Publishes Solvency II Phasing-in Approvals Survey

On 10 November, the Central Bank issued a survey to compliance officers of (re)insurance undertakings. The survey, which is being conducted on key Solvency II phasing-in approvals for (re)insurance undertakings (excluding groups and internal model related approvals), is being undertaken by the Central Bank to assist in resource planning and process design. Under Solvency II, the Central Bank will have the power to consider applications submitted by (re) insurance undertakings for approvals or permission regarding phasing-in approvals from 1 April 2015. The survey will close on 12 December 2014.

Central Bank Publishes Skilled Persons' Reporting – Statement Of Proposed Use

Under Part 2 of the Central Bank (Supervision and Enforcement) Act 2013, the Central Bank, in exercising its supervisory role over regulated financial service providers, may oblige a regulated financial service provider (or a related undertaking) (together, the Reviewee) to provide a report (a Skilled Persons' Report) (the SPR) on matters specified by the Central Bank. The Central Bank may only exercise its power to commission a SPR after having considered if any other powers available to it are more appropriate in the circumstances. To provide further guidance on these obligations, on 19 November the Central Bank published the 'Skilled Persons' Reporting – Statement of Proposed Use'.

The SPR will be used by the Central Bank for the following purposes: (1) as a diagnostic tool to identify and measure risks; (2) as a preventative action to limit or reduce identified risks; and (3) as a remedial action to allow the Central Bank to respond, as appropriate.

If the Central Bank is of the opinion that an SPR is required, the Central Bank will issue a notice (the Notice) obliging the Reviewee to provide the SPR to the Central Bank, at the Reviewee's expense. The Central Bank will consider if it would be more appropriate for the Reviewee to undertake the work themselves and report directly to the Central Bank. The Notice will set out the scope, timeframe and form of the SPR. The skilled person preparing the SPR should be a lawyer, accountant, auditor or another person with the appropriate knowledge of the Reviewee's business. The skilled person has specific obligations in relation to communicating and reporting to each of the Central Bank and the Reviewee. The Central Bank may, at its own discretion, engage in tri-lateral discussions with the Reviewee and the skilled person.

A link to the 'Skilled Persons' Reporting – Statement of Proposed Use' is here.

Central Bank Publishes Industry Letter Regarding Protected Disclosures

On 5 November, the Central Bank published an industry letter (the Letter) outlining relevant provisions of the Central Bank (Supervision and Enforcement) Act 2013 (the 2013 Act) which are of particular importance to regulated firms and those in PCFs. The Letter sets out Section 38 of the 2013 Act which relates to the definition of a "protected disclosure" and notes that the 2013 Act provides certain protections for employees who make a protected disclosure. However, in the Letter, the Central Bank emphasises that it does not have a role in administering those protections or in determining whether a disclosure is a protected disclosure for the purposes of the 2013 Act. The Letter also highlights the obligation placed on PCFs to disclose to the Central Bank information which is material to a protected disclosure and requests that each PCF be made aware of their obligations.

Finally, the Letter refers to the recently enacted Protected Disclosures Act 2014 (the 2014 Act), which came into effect in July of this year. The Central Bank is a prescribed body under that legislation and as such must treat protected disclosures by workers in accordance with the 2014 Act.

A link to the Letter is here.


Insurance Europe Issues Press Release On The Insurance Block Exemption Regulation

On 4 November, Insurance Europe issued a press release on the Insurance Block Exemption Regulation (IBER). The IBER provides an exemption to certain insurance-specific agreements which would otherwise be caught by European competition laws which prohibit anti-competitive arrangements. The exemption covers two types of agreements between insurance and reinsurance companies: (1) agreements with respect to joint compilations, joint tables and studies; and (2) common coverage of certain types of risks (coinsurance or co-insurance pools). The comment by Insurance Europe coincides with the closure of the European Commission's consultation on the IBER.

Insurance Europe states that the IBER has a fundamental impact on the insurance industry, and ultimately consumers, by enhancing competition and increasing the choice of insurance products available to consumers. Further, it commented that greater technological advances and increased incidences of fraud necessitate greater co-operation and data exchange between insurers. Insurance European called for the IBER to be fully renewed by the European Commission in 2017.

A link to the press release is here.

EIOPA's 4th Annual Conference Held In Frankfurt, Germany

On 19 November, the Chairman of EIOPA, Mr. Gabriel Bernardino, delivered a speech on 'EIOPA Strategic Priorities Going Forward' at the 4th Annual EIOPA Conference in Frankfurt, Germany.

Mr. Bernardino set out EIOPA's strategic priorities going forward as being: (i) ensuring consistency across member states in the implementation and supervision of the Solvency II regime; (ii) incentivising the creation of complementary private pension schemes to supplement public payas- you-go pension systems; and (iii) enhancing consumer protection through risk-based regulation and supervision of the conduct of businesses.

Mr. Bernardino also set out three fundamental objectives which EIOPA will implement to build a robust EU regulatory framework to assist in reforming the current pensions system.

Mr. Bernardino also reiterated EIOPA's commitment to the protection of policyholders and outlined a number of initiatives which EIOPA is currently working on to enhance policyholders' protection. However, Mr. Bernardino stressed that in order to ensure policyholders' protection, national regulators should be provided with the appropriate enforcement powers and resources to ensure the effective supervision of the conduct of businesses.


Solvency II

On 27 November, the Council of the European Union issued a press release stating that the Council decided not to object to the adoption by the European Commission of a Delegated Act which contains the detailed implementing rules for Solvency II. As discussed in last month's Insurance Regulatory Update the European Commission has adopted the Delegated Act by Regulation. Unless the Parliament objects to the Delegated Act, it can now be published and enter into force.

A link to the press release is here.

IMD2 - Council Of The European Union Agrees A General Approach On IMD2

On 5 November, the Council of the European Union published its general position on the proposed insurance mediation directive now known as the Insurance Distribution Directive (IMD2). IMD2 will amend the first Insurance Mediation Directive (Directive 2002/92/EC) (IMD1). This is an important milestone as it allows for negotiations between the Council and the European Parliament to begin with the stated aim of adopting the directive at first reading. IMD2 is designed to improve EU-wide regulation of the retail insurance market in a way that facilitates market integration, promote fair competition between distributors of insurance products, and enhance the protection of policyholders.

Once the directive has been adopted, Member States will have two years to transpose IMD2 into national laws and regulations. Member States will not be prevented from applying more stringent provisions than the requirements set out in the directive to protect consumers provided any such provisions are consistent with EU law.

A link to the press release is here.


On 10 November, the Council of the European Union adopted the Regulation on Key Information Documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs) (the PRIIPs Regulation). The requirements set out in the PRIIPs Regulation will be applicable two years after the PRIIPs Regulation comes into force.

On 17 November, the Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA) (the ESAs) published a joint discussion paper on the use of KIDs for PRIIPs. Under the PRIIPs Regulation, the ESAs are tasked with developing regulatory technical standards (RTS) on the content and presentation of KIDs for PRIIPs. The Joint Committee published the discussion paper to seek views from stakeholders in relation to the drafting of RTS and how standardised KIDs should be developed. Comments on the discussion paper are to be submitted by 17 February 2015.

On 27 November EIOPA issued a consultation paper on 'Product Intervention Powers under the Regulation on KIDs for PRIIPs'. Under the PRIIPs Regulation, EIOPA has certain intervention powers whereby the marketing, distribution and sale of insurance-based investment products giving rise to, among other issues, serious concerns regarding investor protection, can be temporarily prohibited or restricted. EIOPA is preparing its technical advice regarding its intervention powers with the aid of the consultation paper, as requested by the European Commission. Comments on the consultation paper are to be submitted by 27 February 2015.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

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