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Ownership and organisational requirements
Ownership of (re)insurers
Are there any restrictions on ownership of or investment in (re)insurers in your jurisdiction, including any limits on foreign ownership/investment?
There are no specific ownership restrictions, but the Central Bank of Ireland does pay particular attention to the direct and indirect ownership structure of applicants for authorisation. It will not grant an authorisation if, taking into account the need to ensure the sound and prudent management of the undertaking, it is not satisfied as to the qualifications of the owner(s). The Central Bank seems to prefer applications where ownership is held by one or more financial institutions or vested in a wide spread of owners. Close links rules also apply.
What regulations, procedures and eligibility criteria govern the transfer of control of/acquisition of a stake in a (re)insurer?
The European Union (Insurance and Reinsurance) Regulations 2015 provide that the Central Bank must be notified in advance of certain acquisitions and disposals of qualifying holdings, both direct and indirect, in (re)insurers. A ‘qualifying holding’ is a direct or indirect holding that represents 10% or more of the capital of, or voting rights in, the (re)insurer, or makes it possible to exercise a significant influence over the management of the (re)insurer.
In the case of acquisitions, a proposed acquirer may not directly or indirectly acquire a qualifying holding without having previously notified the Central Bank of the size of the intended holding, and must provide sufficient information to enable the Central Bank to consider the proposed acquisition. A specific Acquiring Transaction Notification Form is required. A similar process applies where an entity which already holds a qualifying holding seeks to increase the size of its holding so that its holding would either reach or exceed a prescribed percentage level of 20%, 33% or 50%, or so that the undertaking would become its subsidiary.
An acquisition may only be completed where either the Central Bank has notified the proposed acquirer that it does not oppose the proposed acquisition or, by the end of the assessment period, the Central Bank has not notified it of its opposition.
In the case of the disposal of a qualifying holding or the disposal of part of the qualifying holding, where the remaining holding would fall to or below one of the prescribed percentage levels or would be such that the (re)insurer would no longer be a subsidiary of the disposer, there is a prior notification requirement only.
Must (re)insurers adopt a certain legal structure in order to operate? If no mandatory company organisation applies, what are the common structures used?
A (re)insurer must be either authorised by the Central Bank (as a head office or as a third country branch) or have passported in from another EU or European Economic Area member state. To obtain Central Bank authorisation as an Irish head office, the 2015 regulations require a (re)insurer to be a designated activity company (DAC), a public limited company, a company limited by guarantee, an unlimited company or a Societas Europaea, and have its head office and registered office in Ireland.
The most common legal structure for (re)insurers in Ireland is the DAC.
Do any particular corporate governance requirements apply to (re)insurers, including any eligibility criteria for directors and officers?
The Central Bank’s Corporate Governance Requirements for Insurance Undertakings 2015 apply to all insurers authorised by the Central Bank (including reinsurers, but excluding captives). Among other things, the requirements deal with the composition of the board, roles of the chair, CEO, directors (including executive, non-executive and independent non-executive), chief risk officer and other matters, such as the risk appetite, meetings and committees. Additional obligations are placed on (re)insurers deemed to be ‘high impact’ under the Central Bank’s PRISM regime. A separate set of requirements applies to captives.
Directors and other senior officers also fall within the scope of the Central Bank’s Fitness and Probity Regime, under which persons performing a wide range of functions in a (re)insurer are required to possess a level of fitness (ie, competence and capability) and probity (ie, honesty, ethical judgment and integrity, and financial soundness) befitting the relevant role.
Which (re)insurers must obtain authorisation from the regulator before operating on the market and what is the procedure for doing so?
Subject to certain limited exclusions, a (re)insurer may not carry on (re)insurance business in Ireland unless it holds an authorisation granted by either the Central Bank of Ireland or the competent authority in another EU or European Economic Area member state covering the class of insurance or the reinsurance activity.
(Re)Insurers wishing to establish a head office in Ireland must seek the relevant authorisation from the Central Bank by submitting an application. The applicant must first assess whether its proposed business model requires authorisation and is capable of complying with all relevant legal and regulatory requirements. It must then hold a preliminary meeting with the Central Bank to discuss the application, after which it must provide relevant supporting information to the Central Bank. The Central Bank has published checklists appropriate to each type of (re)insurer which set out the information required to support an application. The checklist and all relevant supporting documentation must be submitted to the Central Bank for review and it will assess whether the application is complete. Once a completed application has been received, the Central Bank will review it and issue comments, or request further information or clarification where required. In practice, the timeline for authorisation is between six to 12 months. Before formal authorisation, a successful applicant will be provided with confirmation of authorisation in principle. Formal authorisation is granted after the applicant’s capital has been introduced and when any other remaining requirements are met.
No checklist or guidelines are yet available for authorisation of branches of third-country (re)insurers but are expected over the coming months.
What are the minimum capital and solvency requirements for (re)insurers operating in your jurisdiction?
An undertaking must hold eligible own funds to cover the minimum capital requirement (MCR) which is calculated in accordance with the European Union (Insurance and Reinsurance) Regulations 2015.
For a life insurer (including a captive insurance undertaking), the absolute floor of the MCR is €3.7 million. For a non-life insurer (including a captive insurance undertaking), the absolute floor is €2.5 million, subject to certain exceptions which may increase it to €3.7 million.
For a reinsurer, the absolute floor is €3.6 million, except a captive undertaking for which the absolute floor is €1.2 million.
The (re)insurer must also hold eligible own funds to cover the solvency capital requirement (SCR) in accordance with the 2015 regulations and the MCR should not fall below 25% or exceed 45% of the SCR.
Do any other financial requirements apply?
(Re)Insurers must also establish technical provisions with respect to all insurance and reinsurance obligations towards policyholders and the beneficiaries of insurance contracts in accordance with the 2015 regulations.
Where a (re)insurer fails to do so, the Central Bank can prohibit the free disposal of the assets (after having first communicated such intentions to the supervisory authorities of any member state(s) in which the (re)insurer operates).
Are personnel of (re)insurers subject to any professional qualification requirements?
The Central Bank’s fitness and probity regime requires that persons performing functions, known as controlled functions, must comply with certain standards – for example, to be competent and capable – and requires the person to have the qualifications, experience, competence and capacity appropriate to the relevant function.
Closely linked to the fitness and probity regime is the Minimum Competency Code 2011 which sets out minimum professional standards for persons providing certain financial services, in particular when dealing with consumers.
What rules and requirements govern the business plans of (re)insurers?
There are no specific rules governing business plans of (re)insurers. The application for authorisation process – which includes a requirement for a scheme of operations – instead dictates the nature and content of the information required. The Central Bank has a checklist of what is required which applicants should consider when developing their applications.
What risk management systems and procedures must (re)insurers adopt?
(Re)Insurers must establish and maintain an effective risk management system comprising strategies, processes and reporting procedures necessary to identify, measure, monitor, manage and report continuously the risks, at an individual and aggregated level, to which they are or could be exposed, and their interdependencies. The risk management system must be well integrated into the organisational structure and in the decision making processes of the (re)insurer where the board of directors is ultimately responsible for ensuring the effectiveness of the system, setting the (re)insurer’s risk appetite and overall risk tolerance limits, as well as approving the main risk management strategies and policies.
The risk management system should cover at least the following areas:
- underwriting and reserving risk management;
- operational risk management;
- reinsurance and other risk-mitigation techniques;
- asset liability management;
- investment risk management; and
- liquidity and concentration risk management.
The Own Risk and Solvency Assessment (ORSA) is part of the risk management system.
Reporting and disclosure
What ongoing regulatory reporting and disclosure requirements apply to (re)insurers?
The Solvency II regime introduced increased regulatory reporting and public disclosure requirements. As such, (re)insurers must make a number of filings to the Central Bank including Quarterly Quantitative Reporting Templates, the Annual Quantitative Reporting Templates, the Solvency and Financial Condition Report (annually) and the Regular Supervisory Report (at least every three years). (Re)Insurers are also required to submit the ORSA annually at any time during the year and must submit their financial statements and reports as approved at the annual general meeting.
In addition to the Solvency II requirements, insurers are also required to submit national specific templates.
Do any other operating requirements apply in your jurisdiction?
(Re)Insurers are also subject to general Irish and EU legislative provisions applicable to Irish companies, including company law and legislation covering data protection, employment, health and safety, money laundering and terrorist financing, auditing and taxation.
What are the consequences of non-compliance with the operating requirements applicable to (re)insurers?
Where a (re)insurer does not comply with technical provisions or with the SCR or MCR, the Central Bank has extensive powers of intervention under the 2015 regulations. More generally, under the Central Bank Act 1942, the Central Bank can initiate enforcement action against (re)insurers and their management for contraventions of legal and regulatory requirements which can result in significant fines being imposed (up to €10 million or 10% of turnover for regulated firms).
The Central Bank also has a wide range of:
- more general powers of investigation;
- power to give directions or to impose requirements; or
- to order redress – under the Central Bank (Supervision and Enforcement) Act 2013.
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