On 24 February, the Central Bank’s Director of Insurance Supervision, Sylvia Cronin, addressed Insurance Ireland’s Milliman CRO forum on the new supervisory regime for the insurance industry and areas of focus for the year ahead.
Ms Cronin outlined recent structural changes to the Central Bank’s Insurance Directorate. The new single supervisory division, divided into sectoral teams for life, non-life, cross border and reinsurance, will encourage a consistent cross-sectoral supervisory approach whilst facilitating a flexible sector specific focus where required. Changes to the PRISM engagement model were also explained, covering the mechanism by which firms will now be rated according to both their impact and the riskiness of business areas such as operations, insurance and governance.
Summarising the impact of the modified supervisory framework under Solvency II, Ms Cronin indicated supervision will increase in relation to interaction with firms’ executives and non-executives, targeted risk assessments and on-site activity by supervisory teams. Firms are encouraged to contact their Central Bank supervisory team to discuss the applicable engagement rating and firmspecific areas of focus for 2016.
Turning to the Insurance Directorate’s overall focus for 2016, Ms Cronin spoke about the importance of embedding an effective risk management culture and the CRO’s role in shaping it. The Central Bank will look to see evidence of risk management operating in practice through, for example, the ORSA process. The Central Bank will also focus on the core area of insurance risk, specifically on pricing and reserving, as well as operational risk, product oversight and governance and group risk. Other areas of interest will be: (i) firms’ culture and how that impacts on risk management; (ii) conducting a financial services sector thematic review on cyber risks; and (iii) consideration of how firms respond to external factors such as instability in financial markets and legal and political risks.
Finally, Ms Cronin acknowledged firms’ efforts in implementing the ORSA process. Useful feedback was provided in relation to ORSAs received by the Central Bank during 2015, which firms should bear in mind when preparing them in 2016.
A link to the speech is here.