In June, the Central Bank of Ireland (the "Central Bank") published its Insurance Quarterly Newsletter for Q2 of 2017.
Brexit and authorisations are a key area of focus for the Central Bank and the newsletter contains two articles on Brexit. Sylvia Cronin, in her foreword states "we do have a number of firms actively engaged in the authorisations process and looking to set up businesses of substance in Ireland."
The first article outlines the issues arising from discussions with insurance undertakings in relation to authorisations from the Central Bank. Interestingly, David Cobley, Head of Division - Actuarial, Analytics & Advisory, Insurance Supervision Directorate notes that so far two firms have been authorised (these two firms are Beazley Insurance DAC and Chaucer Insurance Company DAC both of whom were advised by William Fry), a further seven have submitted applications and several more have expressed firm intentions to apply. Considerations that the Central Bank highlight are the issue of substance and the Solvency II principle of proportionality. The article states that each application is unique and that the key question for the Directors of the proposed entity is to demonstrate appropriate control of the business for which they will be responsible.
The paper outlines a number of items for an insurance undertaking to consider and practical steps to follow when deciding to apply for an authorisation. It is of note that the Central Bank has published comprehensive guidance on the application process. In addition, the authorisations team is available for any number of pre-meetings in order to help with the application and understand the needs of the applicant business including engagement with the highest levels at the Central Bank. The insurance authorisations team at the Central Bank has also expanded to meet the requirements of Brexit. Further, the Central Bank is willing to begin assessing an authorisation application despite the fact it may not be 100% complete. All of these measures are further evidence of the Central Bank's user friendly and open-door engagement with companies.
The second article focuses on the opportunities and risks created by Brexit for the domestic insurance market and for entities already regulated in Ireland. Insurance undertakings are advised to have contingency plans in place in order to cover the existing uncertainty post-Brexit in relation to issues such as freedom of establishment, freedom of services, outsourced services and cross-border reinsurance arrangements. Graham Cherry, Supervisory Strategy Team, Insurance Supervision Directorate also notes the opportunities for Irish based entities including to establish themselves as the European centre for business that was previously carried out in the UK. An article on the operational risks faced by insurers and how to reduce them is based on findings from a number of operational risk inspections in 2016 and 2017.
Operational risk should be afforded the same attention as financial risk given the large potential exposures involved and ultimately responsibility rests with the board of the company and directors who are advised to reduce risk as much as possible. For further discussion on operational risk management and in particular the Central Bank's recent publication of a "Dear CRO" letter, please click here.
Finally, the newsletter contains an article which outlines the Central Bank's initial observations on compliance with Solvency II reporting. The Central Bank states that the reporting went very well in terms of valid and timely submissions. The Central Bank are currently writing to certain firms in relation to their queries on quantitative annual reporting and, following from this, will be deciding on the possible need for the resubmission of data.
To read the newsletter in full please click here.