On 10 December 2012, the Central Bank of Ireland (CBI) published updated “Guidelines on the Reinsurance Cover of Primary Insurers and the Security of their Reinsurers” (Revised Guidelines). The Revised Guidelines replace the previous version published in 2010.

In contrast to the 2010 version, the Revised Guidelines are clearly framed against the backdrop of the regulatory requirement for both life and non-life insurance undertaking to have in place administrative and accounting procedures and internal control mechanisms which, in the opinion of the CBI, are sound and adequate. The clear inference is that failure to comply with the Revised Guidelines would constitute a breach of the applicable life and non-life insurance regulations in that regard.

Among the key changes set out in the Revised Guidelines is an express statement that the reporting requirements to be provided for in a reinsurance agreement involving an Irish insurer as cedant should be at least quarterly for proportional policies i.e. polices where the reinsurer pays the same percentage of claims as it receives in premium, and at least annually, for non- proportional reinsurance policies.

The Revised Guidelines also refer insurers to aspects of Solvency II that, while not yet in force, may be useful for insurers to consider at this point. These include the requirement under Solvency II for an insurer to have a written risk management policy in place in relation to reinsurance, as well as other risk mitigation techniques. Notably, the Revised Guidelines also refer to a provision in the current Level 2 text for Solvency II which prohibits, for risk management purposes, sole reliance by (re)insurers on external credit ratings and assessments.

There are also a number of miscellaneous amendments, including the inclusion of references to the CBI’s new PRISM system which will be utilised in determining whether the board of directors of an insurer has established an overall strategic framework for assessing underwriting and reinsurance.