Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

In my role as Minister for Finance I have responsibility for the development of the legal framework governing financial regulation, including insurance. Day-to-day responsibility for the supervision of financial institutions is a matter for the Central Bank, which is statutorily independent in the exercise of its regulatory functions. The Central Bank of Ireland has had an ongoing programme of engagement with RSA Insurance Ireland, RSAII, since the implementation of the bank’s probability risk and impact system, PRISM, as it does with all high-impact companies. As part of the framework, the Central Bank of Ireland engages with firms at a level that corresponds to their impact category; the higher the impact, the higher the level of engagement. Engagement involves reviews, inspections and meetings, and the frequency and level of engagement is associated with a firm's impactrating.I am satisfied that this improved regulatory framework provides for enhanced supervision of the industry and protection of the Irish consumer. With regard to RSA, this programme included eight on-site inspections over a two-year period and ongoing meetings with key role holders such as the chief executive officer, chief finance officer and chief risk officer.

The Central Bank carried out an on-site review of claims cases in RSAII in August 2013 and at this point identified an issue with regard to delays in increasing case reserves for large claims in a timely manner. The identification of this issue by the Central Bank informed the terms of an internal audit that RSAII had scheduled in the same area.

The Central Bank has advised me that it has not had to take direct supervisory measures in relation to recent issues at RSAII, owing to the swift and prompt action by RSA Insurance plc and its ongoing engagement with the Central Bank. The Central Bank will continue to liaise with RSAII and other stakeholders to ensure all matters identified are resolved to the Central Bank's satisfaction.

Separate from the current matters arising in RSAII, the Central Bank published a consultation document in September on requirements for reserving and pricing for non-life insurers. The Central Bank proposes to introduce new measures to strengthen its supervisory framework, including requirements in respect of actuarial opinions, internal audit and the governance of reserving.

In addition to increased staffing levels and the new risk-based supervision framework, PRISM, the Central Bank (Supervision and Enforcement) Act 2013, passed on 11 July, enhances the power of the Central Bank to regulate, supervise and take action against financial service providers. The enhanced powers include whistleblower protection and powers of inspection, investigation and information gathering for Central Bank authorised officers.

At EU level a directive known as Solvency I places requirements on the amount of regulatory capital insurance companies must hold against unforeseen events. Furthermore, on 1 January 2016 Solvency II will commence. The Solvency II EU directive will require new, stronger EU-wide requirements on capital adequacy and risk management for insurers, with the key aim of increasing policyholder protection. This will ensure a modern, risk-based system for the regulation and supervision of European insurance and reinsurance undertakings. Negotiations on the directive reached political agreement on 13 November and preparations are already under way for its implementation in Ireland.

While I am concerned about the issues identified by the Central Bank in the case referred to, I am confident that the improved powers of the Central Bank and the improved regulatory framework, as described, will ensure a safe and solid insurance sector that can provide sustainable insurance products and support the real economy through long-term investments and additional stability.

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