Dáil Éireann Debate, Thursday - 29 May 2014
55. Deputy John Browne asked the Minister for Finance if he will initiate an immediate review of the rules following on from the liquidation of Setanta Insurance, to ensure equal treatment for all policyholders, that standards are harmonised across all jurisdictions to protect consumers of insurance products, and that regulatory arbitrage does not arise when entities are seeking authorisation; and if he will make a statement on the matter. [23566/14]
Amharc ar fhreagraThe current legal and regulatory framework for the provision of insurance in the European Economic Area (EEA), and the supervision of that activity, is prescribed by European Union Law in the Life and Non-Life Insurance Directives. The provision of insurance throughout the EEA on a freedom of services basis and a freedom of establishment basis (i.e. a branch) within this framework is predicated upon the absence of internal market frontiers and the mutual recognition of the authorisation of insurance undertakings by Member States.
The Insurance Directives specify particular roles for both the home Member State supervisory authority (i.e. the supervisory authority that grants an authorisation) and the host Member State supervisory authority (i.e. the supervisory authority of a Member State where an insurance undertaking conducts business of a freedom of services or freedom of establishment basis) of an insurance undertaking. Insurance undertakings authorised under the Insurance Directives are subject to solvency and financial reserving requirements, the supervision of these requirements is the sole responsibility of the home Member State supervisory authority. The primary objective of these requirements is to ensure that claims made in respect of policies issued will be adequately provided for by an insurance undertaking.
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. Under Article 20 of the Third Non-Life Directive the Home Regulator is also required to notify the Host Regulator if the solvency margin of an undertaking falls below the statutory requirement. In such instances the Home Regulator should inform the Host Regulator of the measures it has taken to address the solvency deficit. Where a non-life undertaking authorised in another Member State goes into liquidation and policyholders in relation to risks in this State are affected, the Accountant of the High Court can make an application to the High Court on their behalf, under the Insurance Compensation Fund and, subject to certain exclusions, can distribute sums due to such policyholders from the ICF.
EEA insurance regulators are also members of EIOPA (European Insurance & Occupational Pension Authority) and are required to comply with the General Protocol relating to the collaboration of the insurance supervisory authorities of the Member States of the European Union. This general protocol statement was issued in 2008 and is currently under review by EIOPA. Setanta Insurance was regulated at EU regulatory level in accordance with a directive known as Solvency I and I understand that Setanta met its EU regulatory obligations. Following negotiations that were completed at European level in November, 2013, a new regime known as Solvency II will commence on 1 January 2016, which will further strengthen 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.
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.
