Insurance brokers and underwriting agents must take more responsibility for assessing the financial soundness of companies offering cover, in light of Irish consumers being affected by the collapse of some overseas firms in recent years, according to Ed Sibley, the deputy governor of the Central Bank.
Addressing industry body Insurance Ireland's annual lunch on Wednesday, Mr Sibley also said the Central Bank has placed a priority on pressing at a European level for "improved convergence of supervisory practices and, critically, greater consistency in insurance protection schemes and the approach to resolving failing insurance firms".
Consumers in the Republic have been affected in the past five years by the collapses of foreign-based insurers, including Malta-based Setanta Insurance, Gibraltar-regulated Enterprise Insurance and Danish firm Qudos Insurance. Of the three, only Qudos's claims are being covered by a compensation fund where the firm is based.
Mr Sibley told the audience of insurance executives in Dublin that they must do more work on developing recovery or wind-up plans in the event that their companies run into financial trouble in future.
"Internationally and in Ireland, insurance is behind banking in recovery planning, both in terms of the regulatory framework and firms' preparedness. This needs to change," he said.
“I expect you to be formally considering recovery planning as part of strategy setting and capital planning,” he said, adding that these should cover companies’ outsourcing and reinsurance arrangements and information technology resilience.
“I also expect firms to address impediments to resolution as they are identified.”
The European Insurance and Occupational Pensions Authority (EIOPA) is also focusing increasingly on resolution planning across the European Union, while a review next year of an insurance regulatory regime, known as Solvency II, which took effect in 2016, will also look closely at this issue as well as insurance guarantee schemes.
Judicial Council Bill
Meanwhile, the Judicial Council Bill, which was unveiled in 2017 and is currently before the Seanad, "needs to be progressed" to help reduce general insurance costs in Ireland, according to Mr Sibley.
The Bill would allow judges to recalibrate guidelines for personal injury compensation. A Personal Injuries Commission report published last year found the average compensation award for whiplash in Ireland is almost 4½ times higher than in the UK.
Mr Sibley said that a more stable claims environment should contribute to a reduction in insurance premiums and increase the availability of insurance “providing the insurance industry shares the benefits with the changes with their customers”.