Dáil Éireann Debate, Thursday - 13 December 2018
64. Deputy Michael McGrath asked the Minister for Finance if managing general agents in the insurance industry have a role in ensuring the companies they represent are financially healthy or acting in compliance with European regulations; the level of regulation in place for such agents here; if the Central Bank has a register of such agents; the number operating here; and if he will make a statement on the matter. [52647/18]
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 under European law, the Home supervisory authority is responsible for the prudential supervision and regulation of undertakings operating in Ireland on a freedom to provide services and freedom of establishment basis. In the case of freedom of service business the role of a managing general agent (MGA) is in general terms, to provide access to the market for the cross border insurer. In carrying out this function it must comply with the relevant domestic insurance distribution legislation and the conduct of business rules. While an MGA has a responsibility to its consumers to treat them in a fair and transparent way, and it is in their interests to be selling products from a financially sound insurer, it has no insight into the underlying financial health of such companies other than any publically available information. In addition the overarching prudential framework (Solvency II) is designed to provide them with the necessary certainty that any insurer they act on behalf of is financially sound
Despite the many safeguards in the solvency framework which are designed to minimise the likelihood of insurance failure and the costs to policyholders in the event of failure, it should be noted that Solvency II is not a 'no-failure' regime. It is not possible to build a viable system that provides a cast iron guarantee that no insurer will ever fail. Solvency II is a risk based approach and it is not feasible for insurers to hold sufficient capital to cover every possible event. Instead, it provides that sufficient capital be held in order to ensure that insurers will be in a position, with a probability of 99.5%, to meet their obligations to policyholders and beneficiaries over the following 12 months. In the design of any regulatory system, it must be kept in mind that protection comes at a cost, in other words the higher the level of the guarantee, the higher the cost to policyholders and the economy as a whole. A balance has to be struck in order that insurers can offer affordable, yet sufficiently safe insurance products.
The Deputy should also note that the Central Bank actively engages with the National Supervisory Authorities of all entities writing material levels of business into the Irish market. I understand that it has developed close working relations and established regular contact with the Home Authorities to discuss concerns, issues and market changes and challenges.
In relation to the regulation of MGA’s the Central Bank is the competent authority in Ireland for the authorisation and supervision of insurance intermediaries under the European Communities (Insurance Distribution) Regulations 2018 (IDR). The supervision process for an insurance intermediary mirrors the general supervision approach of the Central Bank. This general supervision approach seeks to ensure that all regulated financial services providers meet their responsibilities to have strong management, internal control and compliance procedures in place, and have people of integrity and competence at all levels in their organisations.
The Central Bank recently published the findings from a thematic inspection of Retail Intermediaries acting as Managing General Agents (MGAs). The report can be found here:
https://centralbank.ie/news/article/findings-of-managing-general-agents-thematic-inspection-and-motor-insurance-research-released
The Central Bank maintains a register of Insurance Intermediaries that is publically available on its website. As MGAs are authorised under the IDR they are included in this register. The register can be found here: http://registers.centralbank.ie/.
