Under the new Solvency II rules in Ireland, the Central Bank of Ireland (the "Central Bank") will be subject to new legal requirements.
The supervisory review process under Solvency II includes the evaluation by the Central Bank of strategies, processes and reporting procedures adopted by (re)insurance undertakings to meet their obligations under Solvency II.
Solvency II - Ireland's Regulatory Framework
The Irish State transposed into Irish law the Solvency II Directive (Directive 2009/138/EC) as amended by the Omnibus II Directive (Directive 2014/51/EC) by way of Statutory Instrument, namely the European Union (Insurance and Reinsurance) Regulations 2015 (the "2015 Regulations") which came into effect on 1 January 2016.
The 2015 Regulations will also be supplemented by more detailed technical Commission Level 2 measures and they in turn will be supplemented by Level 3 guidance for national supervisors developed and adopted by the European Insurance and Occupational Pensions Authority (EIOPA).
The Supervisory Review Process
The Central Bank must, in carrying out the supervisory review process, ensure that it comprises three sub-processes, namely:
(i) the risk assessment framework;
(ii) the detailed review; and
(iii) the supervisory measures.
The Solvency II rules require the Central Bank to discharge its functions under the supervisory review process in a consistent manner. It is a cornerstone of the new regulatory framework that all actions undertaken by the Central Bank as part of the supervisory review process are discharged proportionately throughout all stages of the review process.
To ensure appropriate and effective supervision, the Solvency II rules require the Central Bank to ensure that there is an appropriate level of communication between it and (re)insurance undertakings throughout the entire supervisory review process.
(i) Risk assessment framework
The Central Bank is required under the Solvency II regime to use a risk assessment framework to identify and assess current and future risks that each (re)insurance undertakings encounter or may encounter including the (re)insurance undertaking's capacity to identify, measure, monitor, manage and report on those risks.
In developing the risk assessment framework for each (re)insurance undertakings, the Central Bank should only use this framework for the purposes of conducting effective supervision of (re)insurance undertakings, setting the frequency of the regular supervisory...