Ireland: Insurance Regulatory Update, November 2015

Last Updated: 4 December 2015
Article by Elizabeth Bothwell and Jennifer McCarthy
Most Read Contributor in Ireland, October 2018

IN DOMESTIC NEWS...

PUBLICATION OF LEGISLATION TRANSPOSING SOLVENCY II INTO IRISH LAW

On 4 November 2015, the Minister for Finance signed into law the European Union (Insurance and Reinsurance) Regulations 2015 (the Implementing Regulations). The purpose of the Regulations is to transpose into Irish law Directive 2009/138, Solvency II, as amended by Directive 2014/51, Omnibus II.

The Regulations will come into effect on 1 January 2016. However, certain provisions which enable the CBI to make decisions in advance of the implementation date (e.g. decisions on the use of internal models, USPs, ancillary own funds etc.) take effect immediately (Article 1(3) of the Regulations).

On 20 November 2015, the Finance (Miscellaneous Provisions) Act 2015 was signed into law. The Act will ensure continued regulation for (re)insurers falling outside the scope of Solvency II.

A link to the Regulations is here.

A link to the Act is here.

EXCLUSION OF CERTAIN UNDERTAKINGS FROM SOLVENCY II REQUIREMENTS

The Implementing Regulations, which transpose Solvency II into Irish law, exclude certain undertakings from their remit. A positive obligation is placed on (re)insurers to notify the CBI if it believes it will meet the requirements set out in the Regulations for exclusion from the Solvency II regime.

On 26 November, the CBI published two template notification forms to be used where a (re)insurer meets the requirements for exclusion: (i) due to size (this will largely be firms with gross premium incomes below €5m and gross technical provisions below €25m); and (ii) due to closing activity (this will largely be firms which before 1 January 2016 cease to conduct new business and will terminate activity before 1 January 2019). Any undertaking that expects to meet the conditions for exclusion from Solvency II should notify the CBI, using the appropriate template, by 14 December 2015.

The template notification form for exclusion due to size is here.

The template notification form for exclusion due to closing activity is here.

CENTRAL BANK PUBLISHES THE CORPORATE GOVERNANCE REQUIREMENTS FOR INSURANCE UDNERTAKINGS 2015

The Corporate Governance Code for Credit Institutions and Insurance Undertakings 2013 (the Existing Code) has been split and renamed to provide separate requirements for (re) insurers and credit institutions. The Corporate Governance Requirements for Insurance Undertakings 2015 (the 2015 Requirements) will take effect on 1 January 2016. In the meantime, (re) insurers will continue to be subject to the requirements of the Existing Code.

The 2015 Requirements impose minimum core standards upon all (re)insurers authorised by the CBI (this includes reinsurers but excludes captives and special purpose reinsurance vehicles) and additional requirements on (re)insurers designated as 'high impact' by the CBI. The nature of the requirements applicable to (re)insurers under the 2015 Requirements have not changed from those applicable under the Existing Code. The CBI has indicated that the legal basis and substance of the document is unaffected by the change to the title of the document from a "Code" to "Requirements".

A link to the 2015 Requirements is here.

CENTRAL BANK PUBLISHES SOLVENCY II NEWSLETTER

The latest edition of the Newsletter notes that the Implementing Regulations and the Finance (Miscellaneous Provisions) Act 2015 (which will ensure continued regulation for (re)insurers falling outside the scope of Solvency II) have now been published. Information is also provided on the publication of implementing regulations relating to EIOPA's second set of Implementing Technical Standards (ITS) and the CBI's industry survey on preparedness for Solvency II.

The CBI advises that where applicable, (re)insurers should focus on submitting applications for the establishment of the four key functions required under Solvency II (compliance, risk, audit and actuarial) in advance of 1 January 2016. Guidance is provided on this process and on the fitness and probity treatment when outsourcing these functions. As previously reported, the CBI has also issued a draft set of conditions of authorisation to all (re) insurers. Firms have a 21 day review period to submit comments. The CBI's final decision on the revised conditions is not expected until after the commencement of the Implementing Regulations on 1 January 2016.

The CBI provides clarity on statistical reporting requirements under Solvency II and on the review being undertaken of CBI guidance provided on their website.

Other topics covered in the Newsletter which are dealt with elsewhere in this Update include: the publication of proposed conditions for the domestic actuarial regime and related governance requirements under Solvency II; the CBI's Policy Notice on Ring Fenced Funds and the CBI's Information Note (No.8).

A link to the Newsletter is here.

CENTRAL BANK ISSUES LETTER TO (RE)INSURERS ON WEBSITE UPDATE AND REVIEW

On 27 November 2015, the CBI wrote to all (re)insurers informing them of updates being made to certain sections of the CBI website in preparation for the commencement of the Implementing Regulations, on 1 January 2016.

The CBI has categorised documents currently on the website under six headings: (i) documents which will remain unchanged; (ii) documents which will be updated prior to commencement of the Implementing Regulations; (iii) documents which will be reviewed in 2016; (iv) non-statutory guidance which will not be available on the Solvency II section of the website; (v) requirements which will be revoked following implementation of the Implementing Regulations; and (vi) requirements which were imposed as Conditions of Authorisation and which will be revoked following implementation of the Implementing Regulations.

A link to the letter is here.

CENTRAL BANK PUBLISHES POLICY NOTICE ON RING FENCED FUNDS UNDER SOLVENCY II

In a recent Policy Notice the CBI gives guidance to the industry for the assessment of whether an arrangement constitutes a Ring Fenced Fund (RFF) for Solvency II. RFF classification arises as a result of a restriction (even for a limited time) on a going concern basis of own funds items so that they are not fully available to absorb losses.

All (re)insurers within the scope of Solvency II and groups supervised by the CBI are required to assess whether arrangements should be classified as a RFF. The Policy Notice sets out a non-exhaustive list of 14 criteria which should be taken into consideration as part of this assessment.

The Policy Notice provides some clarification on particular types of arrangements which may give rise to a RFF. The CBI expects with-profits funds will display the characteristics of a RFF. While conventional reinsurance is not intended to be within the scope of a RFF classification, certain reinsurance arrangements may display the characteristics of a RFF.

A link to the Policy Notice is here.

Read the full briefing here.

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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