I propose to take Questions Nos. 178 and 189 together.
The provision of motor insurance cover is a commercial matter for insurance companies, which is based on a proper assessment of the risks they are accepting and the making of adequate provisioning to meet these risks. In my role as the Minister for Finance I have responsibility for the development of national policy and the legal framework governing insurance regulation. In Ireland much of the legal framework governing insurance regulation is determined by agreement at a European level.
Under EU law which governs non-life insurance, an insurer is required to inform the regulator in its home Member State (its home regulator) that it intends to pursue business in another Member State. The home regulator must then provide the host regulator with a certificate attesting that the insurer covers the EU Solvency Capital Requirement, as well as the nature of the business which the insurer intends to undertake. The insurer may start to pursue business from the date that the certificate is communicated to the host regulator, in this case the Central Bank of Ireland.
The Central Bank of Ireland is the competent authority for the prudential regulation of all insurance firms authorised in Ireland, which includes those non-life insurance companies which offer car insurance. Article 5 of the Third Non-life Insurance Directive paragraph 1 states "authorisation shall be valid for the entire Community. It shall permit an undertaking to carry on business there, under either the right of establishment or the freedom to provide services". If a firm is established in another EU member state, that member state is responsible for the Prudential Regulation. In some Member States this is done by a Central Bank while in others this is done by a stand-alone Regulatory body.
A General Protocol relating to the Collaboration of the Insurance Supervisory Authorities of the Member States of the European Union is available at https://eiopa.europa.eu/en/publications/protocols/index.html . It sets out the arrangements for the sharing of information between the Insurance Supervisory Authorities of the Member States.
In the case of entities regulated on a Freedom of Services based, the data provided to the Central Bank of Ireland is: Gross Premiums Written, Gross Claims Paid and Gross Commissions Paid; and 2013 data should be received by the Central Bank on or before the 31 December 2014.
Setanta Insurance Company Limited ("Setanta") is a Maltese incorporated company which was both authorised and prudentially supervised by the Malta Financial Services Authority (MFSA). While its financial position is not supervised by the Central Bank of Ireland, the firm is supervised by the Central Bank for conduct of business rules, i.e. consumer protection obligations. I understand that the Central Bank has been in contact with the MFSA in relation to Setanta in recent times.
Setanta was regulated at EU regulatory level in accordance with a directive known as Solvency I which sets a minimum requirement on the amount of regulatory capital European insurance companies must hold against unforeseen events. Many Member States, including Ireland require insurers to hold higher capital than that required under Solvency I. I understand that Setanta met its EU regulatory obligations and under EU law is therefore entitled to trade across EU borders. Following negotiations that were completed at European level in November, 2013, a new maximum harmonisation regime known as Solvency II will commence on 1 January 2016, which will further strengthen and unify the EU regulatory framework. The Solvency II EU Directive sets out new, stronger EU-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection. The new regime will also ensure greater cooperation between supervisors and greatly reduce the potential for regulatory arbitrage which currently exists.
My Department and the Central Bank will be reviewing the circumstances relating to Setanta and will be reporting to me on what lessons can be learnt and how the framework can be strengthened. The European Commission has also indicated that it will review whether any issues raised relating to the regulatory framework require action.