The Irish reinsurance industry, though perhaps not particularly well known to the general public, is large and represents a significant amount of the reinsurance business written worldwide. Though the industry is currently lightly regulated, with oversight limited to the vetting of reinsurers by the Irish Financial Regulator (the "Financial Regulator"), this state of affairs is set to soon change.
The Department of Finance has recently published what is expected to be the final draft of the European Communities (Reinsurance) Regulations 2006 (the "Reinsurance Regulations" or "Regulations"). The Reinsurance Regulations will transpose European Directive 2005/68/EC (the "Directive"), which was adopted at European level on the 9th of December, 2005, and will establish a new prudential regulatory regime for the Irish reinsurance industry. It is expected that the Reinsurance Regulations will be signed into law by June 2006, which would make Ireland the first country to implement the Directive and would provide the rest of the EU with a potential blueprint for their own implementation schemes.
The Financial Regulator has indicated that early implementation will assist Irish reinsurers in moving towards full compliance with the Directive and will provide certainty for Irish reinsurance market. This article looks at the current regulatory regime governing the Irish reinsurance industry, provides an overview of the proposed new regime to be established by the Reinsurance Regulations and highlights the transitional scheme for existing reinsurers, which will allow such reinsurers adequate time to achieve full compliance.
Current Regulatory Regime
Historically, the activities of reinsurers in Ireland were not supervised by the Irish regulatory authorities. Irish reinsurers were not required to submit accounts or maintain a solvency margin, unlike UK reinsurers, but likely maintained both internally as a matter of good business practice. This environment changed, however, with the Insurance Act, 1989 (the "1989 Act"), which introduced the first regulatory measures to the industry.
Section 22 of the 1989 Act required reinsurers to identify themselves to the Irish regulatory authorities but did not require them to provide significant details of their business operations. However, the measure did allow the authorities to keep track of the number of companies operating in the Irish reinsurance market.
Section 22 was amended by the Insurance Act...