Michael McGrath (Cork South Central, Fianna Fail)
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61. To ask the Minister for Finance the implications for an insurance company if it does not fulfil its duties and obligations under the Solvency II Directive; the role the Central Bank plays in enforcing Solvency II for companies operating here under freedom of services; and if he will make a statement on the matter. [52644/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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At the outset I would like to say that as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation, and have no role in the day to day supervision of insurance companies. I have therefore consulted with the Central Bank on the matters raised by the Deputy.

The Central Bank has advised that the Solvency II Directive represented a substantial overhaul of European insurance regulation. It set out new, more comprehensive EU-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection. The Directive entered into force on 1 January 2016, and is transposed into Irish law by the European Union (Insurance and Reinsurance) Regulations 2015 (SI 485 of 2015).   All insurance undertakings across the European Union must comply with the requirements of the Directive (with certain limited exceptions). Failure to comply with its duties and obligations can result in the withdrawal of an insurance company’s authorisation under Article 144 of the Directive. Further detailed provisions are also in place around their capital requirements and what happens should they breach them (Articles 136 to 143).

A central element of Solvency II Directive is that it allows an insurance undertaking authorised in one member state to conduct business in another EU/EEA state either through:

- establishing a branch operation in the host country and thus conducting business on a ‘freedom of establishment’ (FOE) basis; or

- writing business from the home country (i.e. where authorised) into the host country on a ‘freedom of services’ (FOS) basis.

Where an insurer conducts business in this State either through FOE or FOS, the supervisory authority who has authorised the company (Home supervisor) is responsible for the prudential supervision and regulation of the Irish business of such undertakings.  However, I have been informed that the Central Bank actively engages with the National Supervisory Authorities of all entities writing material levels of business in Ireland in order to keep itself up to date on developments. In this regard, I understand that the Bank has developed close working relations and established regular contact with relevant Home supervisors to discuss concerns, issues and market changes and challenges.

However, it should be noted that as a Host Supervisory authority, the Bank is empowered under Article 155 of Solvency II to take steps in the event an insurance undertaking is not complying with legal provisions applicable to it when operating here.  This Article therefore facilitates  the Bank's  supervision of undertakings authorised in another Member State in relation to how they conduct their business in this country.

In conclusion, while the provision of cross-border insurance is an essential part of the Single market, it is acknowledged that there are obvious difficulties which arise when an insurer fails. It is important therefore that EU supervisors properly and consistently supervise the insurers that they authorise, and that there is greater communications between supervisors across the EU about their respective companies conducting cross-border business. It should be noted that as part of the ongoing review of the European Supervisory architecture, there is a proposal to further improve cross-border co-operation and communication through the strengthening of Cross-Border Collaboration Platforms. These already operate on an ad-hoc basis, however this proposal would ensure a more formal structure is put in place where an insurer is doing a lot of cross border business. This would therefore give the supervisors of countries into which insurance is written a greater insight into how the business is being conducted.

Michael McGrath (Cork South Central, Fianna Fail)
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62. To ask the Minister for Finance the implications for regulating authorities, such as the Central Bank, in the European Union which do not enforce the Solvency II Directive and other EU rules in regard to insurance companies effectively; and if he will make a statement on the matter. [52645/18]

Michael McGrath (Cork South Central, Fianna Fail)
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63. To ask the Minister for Finance the role the European Insurance and Occupational Pensions Authority plays in enforcing the Solvency II Directive and other EU rules in regard to insurance; if it has the role of holding national authorities to account; and if he will make a statement on the matter. [52646/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 62 and 63 together.

At the outset I would like to say that as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation, and have no role in the day to day supervision of insurance companies. I have therefore consulted with the Central Bank on the matters raised by the Deputy.

The Central Bank has advised me that all firms conducting business within the EU must comply with the requirements of the Solvency II Directive, which came into force from 1 January 2016. Solvency II was designed to modernise supervision, deepen market integration and increase the competitiveness of European insurers.

EIOPA is part of the European System of Financial Supervision which is an integrated network of national and European supervisory authorities that provides the necessary links between the macro and micro prudential levels, leaving day-to-day supervision to the national level.

EIOPA’s core responsibilities are to support the stability of the financial system, transparency of markets and financial products as well as the protection of policyholders, pension scheme members and beneficiaries. EIOPA is commissioned to monitor and identify trends, potential risks and vulnerabilities stemming from the micro-prudential level, across borders and across sectors.

EIOPA, where necessary, provides for non-legally binding guidelines and recommendations concerning the implementation of the provisions of the Solvency II Directive and its implementing measures in order to enhance the convergence of supervisory practices.

EIOPA and the supervisory authorities of the Member States collaborate closely with each other to facilitate the supervision of insurance and reinsurance within the EU and including the  examination of any difficulties, which may arise in the application of the Solvency II Directive.

National Supervisory authorities are required to inform EIOPA of any major difficulties in the application of the Solvency II Directive and both EIOPA and the supervisory authorities of the Member States concerned in such situation shall examine those difficulties as quickly as possible in order to find an appropriate solution.

In accordance with their founding EU Regulation (1094/2010 EU) ,EIOPA may investigate non-application by national supervisory authorities of the Solvency II Regulations, or their application in a way, which appears to be a breach of Union law, resulting in a written recommendation to that supervisory authority.  Where the competent national authority does not follow the recommendation, the EU Commission may issue a formal opinion taking into account the EIOPA recommendation, requiring the competent authority to take the actions necessary to ensure compliance with Union law.   Finally, in exceptional situations of persistent inaction by the competent authority concerned, EIOPA may, as a last resort, adopt decisions addressed to individual financial institutions.   In addition, EIOPA is required to report regularly and at least every two years to the European Parliament, the Council and the Commission on the progress of the supervisory convergence in the EU.

The Central Bank has indicated that it fully participates, endorses and supports EIOPA’s mandate to contribute to the establishment of high quality common regulatory and supervisory standards and procedures and regularly contributes and provides feedback to enhance such convergence.

In February 2017, EIOPA developed a cross-border platform of cooperation between National Supervisory Authorities, and the Central Bank of Ireland has advised me that they participate fully in these platforms with other relevant supervisory authorities. These platforms provide all National Supervisory Authorities with the opportunity to discuss concerns in relation to specific undertakings, local markets and share general market developments.  It should be noted that as part of the ongoing review of the European Supervisory architecture, there is a proposal to further improve cross-border co-operation and communication through the strengthening of these Cross-Border Collaboration Platforms in order to give supervisors of countries into which insurance is written a greater insight into how the business is being conducted.

Finally, I understand that the Central Bank of Ireland was also part of the EIOPA working group set up to amend the General Protocol to increase the level of information shared between National Supervisory Authorities. In January 2017, EIOPA revised the General Protocol now called EIOPA Decision on the collaboration of the insurance supervisory authorities. The new Decision addresses new flows of information and increased collaboration between supervisory authorities and strengthens EIOPA’s role as the central hub for information collection and sharing.

Michael McGrath (Cork South Central, Fianna Fail)
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64. To ask the Minister for Finance if managing general agents in the insurance industry have a role in ensuring the companies they represent are financially healthy or acting in compliance with European regulations; the level of regulation in place for such agents here; if the Central Bank has a register of such agents; the number operating here; and if he will make a statement on the matter. [52647/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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At the outset I would like to say that as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation, and have no role in the day to day supervision of insurance companies. I have therefore consulted with the Central Bank on the matters raised by the Deputy.

The Central Bank has advised that under European law, the Home supervisory authority is responsible for the prudential supervision and regulation of undertakings operating in Ireland on a freedom to provide services and freedom of establishment basis. In the case of freedom of service business the role of a managing general agent (MGA) is in general terms, to provide access to the market for the cross border insurer. In carrying out this function it must comply with the relevant domestic insurance distribution legislation and the conduct of business rules. While an MGA has a responsibility to its consumers to treat them in a fair and transparent way, and it is in their interests to be selling products from a financially sound insurer, it has no insight into the underlying financial health of such companies other than  any publically available information. In addition the overarching prudential framework (Solvency II) is designed to provide them with the necessary certainty that any insurer they act on behalf of is financially sound

Despite the many safeguards in the solvency framework which are designed to minimise the likelihood of insurance failure and the costs to policyholders in the event of failure, it should be noted that Solvency II is not a 'no-failure' regime. It is not possible to build a viable system that provides a cast iron guarantee that no insurer will ever fail. Solvency II is a risk based approach and it is not feasible for insurers to hold sufficient capital to cover every possible event. Instead, it provides that sufficient capital be held in order to ensure that insurers will be in a position, with a probability of 99.5%, to meet their obligations to policyholders and beneficiaries over the following 12 months.  In the design of any regulatory system, it must be kept in mind that protection comes at a cost, in other words the higher the level of the guarantee, the higher the cost to policyholders and the economy as a whole. A balance has to be struck in order that insurers can offer affordable, yet sufficiently safe insurance products.

The Deputy should also note that the Central Bank actively engages with the National Supervisory Authorities of all entities writing material levels of business into the Irish market. I understand that it has developed close working relations and established regular contact with the Home Authorities to discuss concerns, issues and market changes and challenges.

In relation to the regulation of MGA’s the Central Bank is the competent authority in Ireland for the authorisation and supervision of insurance intermediaries under the European Communities (Insurance Distribution) Regulations 2018 (IDR).  The supervision process for an insurance intermediary mirrors the general supervision approach of the Central Bank.  This general supervision approach seeks to ensure that all regulated financial services providers meet their responsibilities to have strong management, internal control and compliance procedures in place, and have people of integrity and competence at all levels in their organisations.

The Central Bank recently published the findings from a thematic inspection of Retail Intermediaries acting as Managing General Agents (MGAs).  The report can be found here:

The Central Bank maintains a register of Insurance Intermediaries that is publically available on its website.  As MGAs are authorised under the IDR they are included in this register. The register can be found here: .

Michael McGrath (Cork South Central, Fianna Fail)
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65. To ask the Minister for Finance if he has raised issues with his European counterparts regarding insurance regulation, consistent enforcement of European insurance regulation and the need for compensation mechanisms to be put in place across the EU; the dates on which these issues were raised; and if he will make a statement on the matter. [52648/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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At the outset, the Deputy should note that I am very conscious of the problems caused in recent years by a number of non-life companies passporting into the Irish market particularly on the motor side.  I am very unhappy that supervisors in the authorising countries in question have not done their job adequately, and as a result the Irish Compensation Fund and by extension, Irish policyholders have had to pay the price for these failures. On the other hand, however, Ireland is a major beneficiary of the cross border passporting regime particularly on the Life insurance side. In addition, as you are aware all interested observers of the Irish motor insurance market in recent years have been signalling the need to make it more competitive by encouraging new entrants. Generally because of the relatively small scale of the Irish market most new entrants will be freedom of service operators. Consequently, whilst there are undoubtedly some problems with the passporting model, it is likely that consumers would have greater difficulty getting competitively priced cover in its absence.

In relation to engaging at European level, my officials attend the Commission Expert Group on Insurance issues which is held at least three times per year (e.g. 6 February, 29 May and 20 September 2018 this year).  This Group provides a forum to discuss issues such as the consistent application of Solvency II as well as proposals for any amendments to the Directive including Commission Delegated Regulations. As it has been some time since the Council has discussed insurance matters I have not to date directly raised with my European counterparts issues regarding insurance regulation, consistent enforcement of European insurance regulation and the need for compensation mechanisms to be put in place across the EU.  However, the Deputy can be assured that as and when appropriate I will do so.

At present, there is no harmonisation of insurance guarantee schemes across Europe. However, there have been a number of reports and initiatives in this area in recent years including:

- A 2010 Commission white paper on the introduction of an EU wide framework of Insurance Guarantee Systems. No significant progress was made on this framework subsequently as the development of Solvency II was the priority piece of work.

- A 2015 Commission discussion paper on the possibility of introducing a recovery and resolution regime for insurance undertakings which could include an Insurance guarantee Scheme.

- In 2017 the Commission issued a questionnaire to all Member States seeking information on Recovery and Resolution including experiences with failures and near-failures of insurers.

- The European Systemic Risk Board published a report “Recovery and Resolution for the EU insurance sector: a macro prudential perspective” in August 2017. The Central Bank of Ireland was represented on the drafting team.

- EIOPA published an Opinion to Institutions of the European Union on the Harmonisation of Recovery and Resolution Frameworks for (Re) Insurers (July 2017).

- Work is also underway at an EIOPA level, where a project group has been set up to examine more broadly recovery and resolution within insurance and in relation to Insurance Guarantee Schemes, a discussion paper was published on this topic:

Recently, in May 2018 the European Commission proposed an amendment to the Motor Insurance Directive which would oblige member states to set up Insurance Guarantee Schemes to cover the cost of insolvent motor insurers. This is still subject to negotiation  so the technical details are being worked out, but you can rest assure that my Department and the Central Bank are continuing to work closely with their European counterparts on this issue.

Finally, while the provision of cross-border insurance is an essential part of the Single Market, it is acknowledged that there are obvious difficulties which arise when an insurer fails. It is important that EU supervisors properly and consistently supervise the insurers that they authorise, and that there is greater communications between supervisors across the EU about their respective companies conducting cross-border business. It should be noted that as part of the ongoing review of the European Supervisory architecture, there is a proposal to further improve cross-border co-operation and communication through the strengthening of Cross-Border Collaboration Platforms. These already operate on an ad-hoc basis, however this proposal would ensure a more formal structure is put in place where an insurer is doing a lot of cross border business. This would therefore give the supervisors of countries into which insurance is written a greater insight into how the business is being conducted.