The Solvency II Directive is the principal piece of legislation dealing with the regulation of the insurance industry in the European Union, and applies to almost all insurers and reinsurers. It has both a prudential and a consumer protection dimension to it. It was transposed into Irish law as the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. 485 of 2015) and the legislation entered into force on 1 January 2016.
As stated in the recitals for the Directive, “the protection of policy holders presupposes that insurance and reinsurance undertakings are subject to effective solvency requirements that result in an efficient allocation of capital across the European Union”. Furthermore, “the main objective of insurance and reinsurance regulation and supervision is the adequate protection of policy holders and beneficiaries. … Financial stability and fair and stable markets are other objectives of insurance and reinsurance regulation and supervision which should also be taken into account but should not undermine the main objective.”
The Solvency II framework sets out strengthened requirements around capital, governance and risk management in all EU authorised (re)insurance undertakings. It also introduces increased regulatory reporting requirements and public disclosure requirements. The new requirements are intended to reduce the likelihood of an insurer failing and therefore is designed to provide policyholders with increased protection.
In addition to Solvency II, Section 117 of the Central Bank Act 1989 provides that the Central Bank may produce a Consumer Protection Code for institutions that it licences, after consultation with the Minister for Finance. As the Deputy is aware, the provisions of this Code are binding on regulated entities and must, at all times, be complied with when providing financial services.