On 27 April 2021, the Central Bank published its feedback statement in respect of Consultation Paper 131 "Regulations for pre-emptive recovery planning for (re)insurers". In the feedback statement, the Central Bank referred to the introduction of specific regulations to address the requirement to establish and maintain pre-emptive recovery plans by insurers - the (Supervision and Enforcement) Act 2013 (Section 48(1)) (Recovery Plan Requirements for Insurers) Regulations 2021 (S.I. Number 184 of 2021) ("Regulations"). These Regulations were enacted on 19 April 2021.
Under Section 4 of the Regulations, (re)insurers must prepare a recovery plan by 31 March 2022, or, where the (re)insurer is newly authorised by the Central Bank on or after the date on which these Regulations come into operation, prepare the recovery plan within 12 months of the date of its authorisation.
Gráinne Callanan, partner: "The first point to note in respect of the feedback statement and the Regulations is that they are in respect of "pre-emptive recovery plans" and not "resolution plans". The distinction here is important as they address different issues. Secondly, the request to prepare and maintain pre-emptive recovery plans is not a new development, the Central Bank has been known to request these from (re)insurers in recent years, however the distinction now is that the requirement will be universally applicable with specific guidance as to what these plans should contain, which is a welcome development.
The timing of the Regulations however is interesting. It has been well documented by the European Insurance and Occupational Pensions Authority ("EIOPA") that it intends to consider recovery planning as one its priorities for 2021. Once a final proposal is to hand, we may well see a situation arise where the Central Bank's requirements diverge from EIOPA's guidance. This of course can go one of two ways. If the Regulations go further than what EIOPA set out, such a situation which will no doubt will lead to some disquiet within in the industry. If EIOPA impose stricter requirements, Irish insurers will have to adapt accordingly. Matheson will monitor these developments and update clients in due course.
Regardless of EIOPA's actions, insurers need to work to the deadlines set out in the Regulations and be prepared to demonstrate to the Central Bank the process they have gone through to develop their plans.
On the publication of the Regulations, Domhnall Cullinan, Director of Insurance Supervision observed that the Regulations are "an important step forward in strengthening the risk management frameworks of insurance firms and should reduce the probability of (re)insurers failing and the impact of such failures".
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