On 16 September 2022, the Central Bank of Ireland (CBI) published the latest edition of its quarterly newsletter for the (re)insurance sector (the Newsletter). There is plenty of noteworthy content for Irish (re)insurers to digest and some interesting CBI commentary relating to applying certain insurance-specific developments to the wider financial services sector more generally. A number of the main highlights from the Newsletter are outlined below.

Sustainable Insurance

• In August 2022, the CBI published a Consultation Paper on Guidance for (Re)Insurance Undertakings on Climate Change Risk to clarify its supervisory expectations on how (re)insurers address climate change risks in their business and to assist them in developing their governance and risk management frameworks accordingly (see article here). Significantly, the Newsletter states that although this guidance is initially developed for the (re)insurance sector, the CBI is considering adapting it for other financial services sectors in due course.
• The Newsletter provides a detailed overview of the main findings from the CBI’s recent thematic review of the Own Risk and Solvency Assessments (ORSAs) of 39 (re)insurers (split across life, non-life and reinsurance sectors). Summarily, the CBI’s three main observations for (re)insurers are:
  • A holistic approach must be adopted to understanding potential climate change exposures to the business to include secondary impacts, their materiality and other areas requiring more focus.
  • The impact of climate change on (re)insurers’ business model beyond the current planning period must be considered.
  • Climate change risk assessments should be integrated into (re)insurers’ business planning and strategic thinking.

Although the CBI acknowledges that these observations have been incorporated into its draft Guidance on Climate Change Risk, it expects that the observations arising from its recent thematic review are applied proportionately as soon as possible.

Outsourcing and underwriting to MGAs

The Newsletter outlines the key findings from the CBI’s recent thematic inspection of (re)insurers’ governance and oversight of Managing General Agents (MGAs) controls. The CBI’s view is that significant improvements are needed in this area of operational risk for (re)insurers. Furthermore, it expects (re)insurers’ approach to such arrangements to align with Solvency II outsourcing requirements regarding critical or important functions or activities. We suggest that all (re)insurers that work with MGAs pay particular attention to the CBI’s findings as outlined in the Newsletter and ensure that these are fully incorporated into their risk and compliance frameworks.

Operational Resilience

The CBI reports on the main findings from its recent analysis of the six most significant domestic non-life insurers relating to their operational resilience during the COVID-19 pandemic, including any resulting consumer detriment. The CBI identified some common themes as relevant to ensuring appropriate levels of customer service in the future. The three main themes concerned the areas of (i) digital delivery, (ii) resourcing, and (iii) complaints and errors. Notably, the CBI commented in the Newsletter that although their analysis centred on the operational resilience of non-life insurers, the main findings are equally applicable to all regulated financial service providers.

Digitalisation

Finally, the Newsletter contains a brief update on the CBI’s activities concerning technology and digitalisation in the insurance sector. The CBI states that it will continue to monitor the ongoing digitalisation of the insurance sector and re-confirms its intention to issue a digitalisation survey to a sample of Irish (re)insurers during Q4 2022.

To read the Newsletter in full, please see the CBI’s website here.

Contact Us

If you wish to discuss any of the topics in this article, please contact any member of the Insurance team or your usual William Fry contact.

Contributed by Catherine Carrigy