At the outset it should be noted that governance procedures within firms are of vital importance in managing insurance companies and protecting the Irish consumer. In this regard, the Acquisitions Directive (transposed into Irish law in June 2009); the Central Bank's Corporate Governance Code and the recently introduced Fitness and Probity regime act as important safeguards in that matter. To improve regulatory supervision and protect the Irish consumer, the Central Bank has, along with increased staffing levels, introduced a risk-based supervision framework, PRISM (Probability Risk and Impact SysteM). The framework establishes a new approach for supervisory engagement with regulated firms. The first phase covering banks and insurers was rolled out in late 2011. The system categorises all regulated firms into four separate impact categories, which are based on the level of damage a firm could cause to the financial system, economy and consumers were it to fail. Firms are categorised as high impact, medium-high impact, medium-low impact or low impact, which determines the number of supervisors assigned and level of interaction with each firm.
As part of the framework the Central Bank of Ireland engages with firms at a level that corresponds to their impact category; the higher the impact, the higher the level of engagement. Engagement involves reviews, inspections and meetings, and the frequency and level of engagement is associated with the firms' impact rating. Additionally, the Central Bank (Supervision and Enforcement) Act 2013, enacted on the 11th July, 2013, enhances the power of the Central Bank to regulate, supervise and take action against financial service providers. Some of the enhanced powers include: whistle blower protection and powers of inspection, investigation and information gathering for Central Bank authorised officers. Taken together this overall framework should ensure that the Irish consumer will be protected as far as possible.
Furthermore, the Deputy should note that at EU level a directive known as Solvency I places requirements on the amount of regulatory capital insurance companies must hold against unforeseen events. Following years of negotiations, on 1 January 2016 Solvency II will commence. The Solvency II EU Directive will set out new, stronger EU-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection. This modern, risk-based system for the regulation and supervision of European insurance and reinsurance undertakings is necessary in order to ensure a safe and solid insurance sector that can provide sustainable insurance products and support the real economy through long-term investments and additional stability.
Negotiations on this directive are nearing the end in Brussels and preparations are already underway for this in Ireland.