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Central Bank’s programme of themed inspections for (re)insurers in 2016

05 May 2016

The Central Bank of Ireland (Central Bank) recently published its programme of themed inspections for 2016 (the Programme). It reflects its supervisory priorities and also anticipating emerging risks. The Programme highlights certain areas identified by the Central Bank where it considers (re)insurers may need to improve compliance standards.

In tandem with the Central Bank’s day-to-day supervisory work, the Programme will involve company-focused inspections combined with thematic reviews. The Programme will reflect the full implementation of Solvency II since 1 January 2016.

Some of the themes to be covered are:

  • Risk management and capital planning

−         Evidence based assessment of risk management frameworks and risk culture within (re)insurers, with a particular focus on operational risk management within the domestic non-life and life sectors.

−         Assessment of whether the Own Risk and Solvency Assessment is embedded in the risk management and decision-making process of (re)insurers, as well as Own Solvency Need assessments and the appropriateness of the standard formula (where relevant).

  • Motor insurance pricing oversight and governance review

−         Focus on the sustainability of premium levels within the market and the adequacy of pricing risk assessments conducted.

−         Insights provided by this review are expected to feed into assessments of product oversight and governance planned for later in the year.

  • Claims Management and Underwriting Discipline

−         Examination of policies, procedures and internal control frameworks within the claims and underwriting divisions of firms across the domestic non-life sector.

−         Assessment of the maintenance of underwriting discipline and governance arrangements in relation to existing books of business.

  • Less Complex Companies

−         Inspection of a sample group of low impact (re)insurers targeting governance and risk management frameworks and focusing on reinsurance and outsourcing arrangements.

−         For medium and low impact firms, the Central Bank will focus on outsourcing arrangements and the internal controls put in place to mitigate inherent connected operational risks.

The Central Bank also stated that an underlying theme of its Programme will be ‘cultural awareness’ which covers board-room dynamics, risk culture and conduct culture. The view of the Central Bank is that an observation of attitudes and behaviours will enable supervisors to form a more rounded view on the effectiveness of governance, controls and risk management within (re)insurers.