Ireland: Insurance Regulatory Update - November 2016

Last Updated: 13 December 2016
Article by Elizabeth Bothwell and Jennifer McCarthy
Most Read Contributor in Ireland, November 2018



On 28 November, the Central Bank issued a Frequently Asked Questions (FAQ) document in relation to their Guideline for Solvency II (Re) Insurance Undertakings on Directors' Certifications which was published in August 2016. The guideline sets out the requirements for all Solvency II (re)insurance undertakings from 2016 onwards in relation to directors' certification. This FAQ document should be read alongside the guideline as it was drafted to reflect, and in anticipation of, questions in relation to the guideline.

A link to the FAQ document is here.


On 17 November, the Insurance Directorate of the Central Bank published slides from an update on the current issues in general insurance.

The slides deal with the increasing number of injury claims and the resulting increase in the price of premiums and addressed the relationship between investment income decline and increasing competition. Motor profitability challenges were also discussed with the aid of various graphs which showed that the change in price did not occur immediately but rather after a time lag.

Another topic which the presentation touched on was developing the role of the actuarial function with the focus on opinions to boards and protection of the consumer. The slides outline the Central Bank's regulatory focus in relation to settlement of injury claims, collaboration with other regulators, on-site inspections and the creation of an analytical platform.

A link to the presentation is here.


On 21 November, the Central Bank issued Consultation Paper 106 setting out amendments to the Minimum Competency Code 2011 (MCC). The Central Bank has made a distinction between amendments on which it is not specifically seeking observations and proposals on which it is consulting.

The Central Bank is not consulting on the amendments required to be made as a result of developments under EU legislation. The Central Bank will introduce reforms to amend Parts 1, 3 and appendices 1-4 of the MCC to comply with this legislation. It also intends to replace Part 2 of the existing MCC, which imposes obligations on regulated firms, with regulations.

Proposed amendments to the MCC on which the Central Bank is requesting the opinion of stakeholders fall under five headings: qualifications and experience requirements; devising or otherwise creating products; credit unions; members of the board of a mortgage credit intermediary; and reinsurance.

Responses to the consultation paper should be submitted by 15 February 2017.

A link to the consultation paper is here.


On 17 November, Sylvia Cronin, the Central Bank's Director of Insurance Supervision, addressed the Annual General Conference of the Irish Brokers Association.

Ms Cronin discussed the new regulations brought in by Solvency II and the impact it had on insurance undertakings that brokers partner with. She also specifically referenced the publication by EIOPA, in April this year, of guidelines relevant to brokers on Product Oversight and Governance Arrangements by Insurance Undertakings and Insurance Distributors.

Ms Cronin spoke about the importance of culture and the outcomes that the Central Bank want to see as a result of the attitude and behaviour of actors in the financial services industry. She referred to the need to provide the "right product for the right consumer at the right time" and how to best to achieve this aim. She also touched on the benefit of engaging with customers and providing feedback to insurance companies.

Ms Cronin dealt with the increasing cost of motor insurance premiums and the duty brokers have to help prevent insurance fraud. Ms Cronin also addressed the cyber security risk posed by the increased reliance on technology. She talked about Brexit and the increase in enquiries from firms seeking authorisation in Ireland. And finally, she mentioned the need to keep abreast of how the sector is evolving and the need to be ready to make the changes necessary to deal with these developments.

A link to the address is here.


On 2 November, the Central Bank published release notes for version 1.1.0 hotfix of the Central Bank Solvency II National Specific Templates DPM and XBRL Taxonomy. Version 1.1.0 of the NST Taxonomy was published at the start of October, as reported in the October edition of the Arthur Cox Regulatory Update. Two minor issues have been identified with version 1.1.0 of the NST Taxonomy. The taxonomy deliverables and labels for table codes have been updated to address these issues.

A link to the release notes is here.


The Fourth Money Laundering Directive (MLD4) was published in the Official Journal on 5 June 2015. With effect from 15 November 2016, Article 30(1) of MLD4 has been transposed into Irish law, 7 months in advance of the June 2017 transposition deadline, by way of the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (the "Regulations").

Companies and other legal entities incorporated in Ireland are now required to establish an internal beneficial ownership register (the "Register") which collates current, accurate and adequate information in relation to the "beneficial owners" of the company. Where this information is not known entities must take all reasonable steps to ensure the information is obtained and entered on the Register. The Register should include the names of the senior managers (including the directors and CEO) of the relevant entity as "beneficial owners" where no beneficial owners can be identified.

A beneficial owner is an individual who ultimately owns or controls the relevant entity through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in the relevant entity. A shareholding of 25% plus one share or an ownership interest of more than 25% will be evidence of ownership or control.

A link to the Regulations is here.


On 16 November, the Health Insurance (Amendment) Bill 2016 was referred to the Select Committee on Health. The Bill amends the Risk Equalisation Scheme (the "Scheme") which has been in place since 1 January 2013.

Under the Scheme, in order to compensate insurers for the extra cost of insuring older and less healthy members of society they receive risk equalisation credits. Open market insurers pay stamp duty levies in respect of each insured life covered and these levies fund the credits. The Health Insurance Authority administers the risk equalisation fund into which the stamp duty levies are transferred.

The main object of the Bill is to lay down the amount of premium to be paid from the risk equalisation fund which would apply from 1 April 2017 with regard to age, gender and level of cover. The Bill would also make amendments to the Stamp Duty Consolidation Act 1999 as the community rating stamp duty levies would need to be revised in order to fund the risk equalisation credits. The Bill also outlines the circumstances in which an insurer may take a health insurance product off the market and provides a definition of reasonable profit for the purpose of assessing overcompensation under the Scheme.

In order to accommodate the Revenue Commissioners in their collection of stamp duty the Bill proposes to move the date on which the changes in the rates of credits and stamp duty come into effect from 1 March to 1 April.

A link to the Bill is here.


On 24 November, the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach issued a report on the rising cost of motor insurance. The report stated that the motor insurance industry has withheld information from the public and engaged in behaviour of a cartel-like nature. The committee flagged that the trend of increasing motor insurance costs is unlikely to be halted in the short- term. Transparency and its impact on insurance premiums is discussed in the report and the committee have provided a number of recommendations in that regard. This report will complement the parallel work being undertaken by the Cost of Insurance Working Group in the Department of Finance chaired by Mr. Eoghan Murphy TD, Minister of State.

Insurance Ireland welcomed the reforms proposed in the report and has indicated that it wants to collaborate with the government in order bring in, as a matter of urgency, policies which will stabilise the sector.

The Central Bank also issued a comment in relation to the report. It was criticised in the report for failing to protect consumers but the Central Bank has repeated its assertion that it cannot, as a matter of European Law, get involved in pricing.

Links to the report and the statements from Insurance Ireland are here and here.


On 10 November, Minister of State Eoghan Murphy gave the opening address at the Ireland Counter Fraud Conference. He stated that the financial stability of the insurance sector was vitally important. By serving the needs of both consumers and businesses, attracting global capital and through employment the insurance sector contributes greatly to economic activity in Ireland. The efficient operation of the sector is crucial, due to its economic significance.

The Minister spoke about the work of the Cost of Insurance Working Group, referred to in the October edition of the Arthur Cox Regulatory Update, in establishing the reasons for the rise in insurance costs. Insurance fraud and its effect on the cost of claims, and therefore premiums, is one of the areas which the working group is investigating. The working group is looking at a number of measures which could be used to combat insurance fraud and will be providing a report to the Minister for Finance with recommendations in relation to this.

Finally the Minister invited the attendees at the conference to send their ideas and experiences to the working group for consideration.

A link to the opening address is here.


On 10 November, Insurance Ireland once again called for the abolition of the Life Assurance Levy and reform of the Life Assurance Exit Tax. Insurance Ireland claims Life Assurance savings and investments products, which tend to be availed of by middle income earners, are disproportionately affected by these measures.

Since the introduction of the 1% Life Assurance Levy on policy types of life assurance, including savings and investments, in 2009, the income generated by the levy has increased by 250%.

The Life Assurance Exit Tax rate is currently 41%. Traditionally, the Life Assurance Exit Tax and the Deposit Interest Retention Tax (DIRT) have been linked; however the reduction in DIRT in the recent budget, to bring it down to the CGT rate of 33% by 2020, has not been matched by a similar reduction in the exit tax.

Kevin Thompson, CEO of Insurance Ireland, urged the government to remove the unequal application of the levy and reduce the exit tax in the Finance Bill.

A link to the press release is here.



On 9 November, the European Commission formally discussed and ultimately proposed an extension to the date of application of the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation which was due to take effect on 31 December 2016.

As reported in the September edition of the Arthur Cox Regulatory Update the European Parliament rejected the propsed Regulatory Technical Standards (RTS) which set out the format and methodology used to compile the Key Information Documents (KID). Following this the European Parliament and the Council of the EU, by a majority of Member States, called for the entry into application of the PRIIPs Regulation to be postponed.

The European Commission believes that having the RTS in place before the entry into application of the PRIIPs Regulation would better serve the aims of the regulation. Therefore, issuers and distributers of PRIIPs now have until 1 January 2018, a deferral of 12 months, to put the relevant provisions in place.

On 10 November, the European Commission wrote to the three European Supervisory Authorities (ESAs). In its letter the European Commission stated its intention to amend the provisions of the RTS relating to multi-option PRIIPs, the methodology for the calculation of future performance scenarios and the use of the 'comprehension alert'. The ESAs now have 6 weeks to resubmit the revised RTS to the European Commision on the basis of the proposed amendments. The letter invites the ESAs to submit amended RTS to the Commission in the form of a formal opinion as soon as possible. Once the RTS is adopted by the European Commission it will still be subject to scrutiny by the European Parliament and the Council of the EU. It is expected that during the first half of 2017 the revised framework will be in place.

Links to the Commission press release and letter are here and here.


On 10 November, the European Commission adopted Implementing Regulation 2016/1976 laying down technical information for the calculation of technical provisions and basic own funds for reporting with reference dates from 30 September until 30 December 2016 in accordance with Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance.

The most recent technical information provided by EIOPA to the European Commission which was published related to end of September 2016 market data. The recitals of the Implementing Regulation explain that there is a need for the technical information to be available immediately and so there is a requirement that it enter into force as a matter of urgency.

The Annexes set out the technical information insurance and reinsurance undertakings will use when calculating technical provisions and basic own funds for reporting with reference dates from 30 September to 30 December 2016. Annex I deals with the relevant risk-free rate term structures. Annex II concerns the fundamental spreads for the calculation of the matching adjustment and Annex III lays out the volatility adjustments for each relevant national market.

The Implementing Regulation came into force on 17 November and shall apply from 30 September 2016. The technical information provided in the Implementing Regulation must be used by both insurance and reinsurance undertakings. This is to ensure that that the conditions for calculation are uniform across all undertakings.

A link to the Implementing Regulation is here.


On 16 November, the Joint Committee of the three European Supervisory Authorities published its final guidelines on the characteristics of a risk based approach to the supervision of anti- money laundering and countering the financing of terrorism (AML/CFT). The guidance, which is consistent with international AML/CFT standards, are addressed to the National Competent Authorities responsible for supervising compliance with AML/CFT obligations and outlines the steps which should be taken when conducting such supervision on a risk-sensitive basis. The Joint Committee is aware that the Competent Authorities are operating on limited resources and, for this reason, the guidance sets out how to allocate these resources in proportion to the risk.

Competent Authorities are required, under the guidelines, to adjust the focus, intensity and frequency of their supervisory actions following their identification and assessment of the exposure of their sector to risk. Suitably qualified staff are required in order to carry out these actions in an informed and consistent manner. Competent Authorities are reminded that they must look beyond the size or systemic importance of a credit or financial institution in their risk assessment.

A link to the guidance is here.


On 15 November, the International Association of Insurance Supervisors (IAIS) published an application paper to assist IAIS members in their development or revision of a regime for the supervision of intermediaries. The application paper sets out some examples of approaches which IAIS members may like to consider when completing this task. The paper also outlines potential ideas to take into account when implementing Insurance Core Principle (ICP) 18 (Intermediaries) and the relevant aspects of ICP 19 (Conduct of business) and incorporating those ICPs into their broader supervisory frameworks.

The paper supplements an application paper published by the IAIS on 4 November 2014 entitled Application Paper on Approaches to Conduct of Business Supervision and focusses on the conduct of business by intermediaries.

The application paper is divided into 4 sections, (1) an introduction, (2) a description of the different types of intermediaries and the variety of intermediation, (3) approaches to supervision of intermediaries within the context of the overall framework for supervision and (4) supervisory requirements and approaches which promote good conduct of business by intermediaries, with reference to ICPs 18 and 19.

A link to the application paper is 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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