Regulations requiring Recovery Plans for (Re)insurers published

• A well-functioning insurance sector safeguards consumers and contributes to economic growth and financial stability.
• New regulations mean (re)insurers are required to prepare pre-emptive recovery plans.
• Deadline for preparation of plans is 31 March 2022.

The Central Bank of Ireland has today (27 April 2021) published the feedback statement (PDF 621.09KB) and responses received to consultation paper 131 “Regulations for pre-emptive recovery planning for (re)insurers)”. In 2020 the Central Bank undertook a public consultation on proposals to introduce formal recovery planning requirements for (re)insurers.

As a result of that consultation the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Recovery Plan Requirements for Insurers) Regulations 2021 were made on 19 April 2021.

The aims of these Regulations are to:

• promote awareness and allow firms to prepare for a range of possible adverse situations;
• enable firms to consider and evaluate the most appropriate and effective mitigation without the resulting pressures of actual severe stress; and
• enable firms to take more effective, comprehensive and thoughtful measures to ensure their timely implementation if required.

These regulations commenced on 19 April 2021 and (re)insurers are now required to:

• prepare a pre-emptive recovery plan that addresses the following areas:
  - governance for recovery planning and utilisation of the plan itself;
  - a description of the (re)insurer;
  - a menu of recovery options;
  - a trigger framework;
  - a set of stress scenarios (to test the recovery options a trigger framework); and
  - a communication strategy and any required preparatory measures.
• review and, if necessary, update the recovery plan at least every 12 months for High and Medium-High impact firms and at least every 24 months for Medium-Low and Low impact firms or after any material change to the legal or organisational structure of the (re)insurer, its business or its financial position.
• provide a copy of the recovery plan to the Central Bank on request.

The deadline for preparation of a recovery plan under the regulations is 31 March 2022 (or within 12 months of authorisation where the (re)insurer is newly authorised on or after the date on which the Regulations come into operation).

Domhnall Cullinan, Director of Insurance Supervision said: “Firms’ preparedness in the face of financial stresses is a key element in protecting policyholders and building financial resilience and stability. This Regulation will require firms to have comprehensive recovery plans, appropriate to their size, nature and scale, which can be quickly and effectively deployed when faced with a deterioration in financial position. Insurance firms should embed recovery planning as part of their strategy setting and capital planning. This Regulation is an important step forward in strengthening the risk management frameworks of insurance firms and should reduce the probability of (re)insurers failing and the impact of such failures”.

Notes to Editor

• Further details on CP 131 - Regulations for pre-emptive recovery planning for (re)insurers is available on the Central Bank’s website.
• The consultation process ran from 15 June 2020 to 25 October 2020. The Central Bank received 9 responses from insurance undertakings, industry and professional bodies and professional advisory firms. Respondents noted their support for the proposal and welcomed the initiative by the Central Bank to implement a framework for pre-emptive recovery planning for (re)insurers. Respondents submitted 145 observations across 30 issues. The final regulations take into account feedback received.
• The new regulations come into force under Statutory Instrument No. 184 of 2021 and are available on the Irish Statute Book website.