Dáil Éireann Debate, Thursday - 13 December 2018
61. Deputy Michael McGrath asked the Minister for Finance the implications for an insurance company if it does not fulfil its duties and obligations under the Solvency II Directive; the role the Central Bank plays in enforcing Solvency II for companies operating here under freedom of services; and if he will make a statement on the matter. [52644/18]
View answerAt the outset I would like to say that as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation, and have no role in the day to day supervision of insurance companies. I have therefore consulted with the Central Bank on the matters raised by the Deputy.
The Central Bank has advised that the Solvency II Directive represented a substantial overhaul of European insurance regulation. It set out new, more comprehensive EU-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection. The Directive entered into force on 1 January 2016, and is transposed into Irish law by the European Union (Insurance and Reinsurance) Regulations 2015 (SI 485 of 2015). All insurance undertakings across the European Union must comply with the requirements of the Directive (with certain limited exceptions). Failure to comply with its duties and obligations can result in the withdrawal of an insurance company’s authorisation under Article 144 of the Directive. Further detailed provisions are also in place around their capital requirements and what happens should they breach them (Articles 136 to 143).
A central element of Solvency II Directive is that it allows an insurance undertaking authorised in one member state to conduct business in another EU/EEA state either through:
- establishing a branch operation in the host country and thus conducting business on a ‘freedom of establishment’ (FOE) basis; or
- writing business from the home country (i.e. where authorised) into the host country on a ‘freedom of services’ (FOS) basis.
Where an insurer conducts business in this State either through FOE or FOS, the supervisory authority who has authorised the company (Home supervisor) is responsible for the prudential supervision and regulation of the Irish business of such undertakings. However, I have been informed that the Central Bank actively engages with the National Supervisory Authorities of all entities writing material levels of business in Ireland in order to keep itself up to date on developments. In this regard, I understand that the Bank has developed close working relations and established regular contact with relevant Home supervisors to discuss concerns, issues and market changes and challenges.
However, it should be noted that as a Host Supervisory authority, the Bank is empowered under Article 155 of Solvency II to take steps in the event an insurance undertaking is not complying with legal provisions applicable to it when operating here. This Article therefore facilitates the Bank's supervision of undertakings authorised in another Member State in relation to how they conduct their business in this country.
In conclusion, while the provision of cross-border insurance is an essential part of the Single market, it is acknowledged that there are obvious difficulties which arise when an insurer fails. It is important therefore that EU supervisors properly and consistently supervise the insurers that they authorise, and that there is greater communications between supervisors across the EU about their respective companies conducting cross-border business. It should be noted that as part of the ongoing review of the European Supervisory architecture, there is a proposal to further improve cross-border co-operation and communication through the strengthening of Cross-Border Collaboration Platforms. These already operate on an ad-hoc basis, however this proposal would ensure a more formal structure is put in place where an insurer is doing a lot of cross border business. This would therefore give the supervisors of countries into which insurance is written a greater insight into how the business is being conducted.
