In a 2001 Report on the Observance of Standards and Codes (ROSC), which uses the 1997 International Association of Insurance Supervisors (IAIS) Insurance Supervisory Principles (ISPs) as a benchmark for assessing insurance supervision in Ireland, the International Monetary Fund (IMF) concluded that overall Ireland was in "substantial compliance" with the ISPs, although a number of shortcomings were identified. According to a 2006 IMF Financial System Stability Assessment Update, the insurance regulatory framework in Ireland has significantly improved since the original 2001 IMF ROSC. Notable progress has been made in strengthening the on-site and off-site prudential supervision framework. Further, the Ireland Financial Services Regulatory Authority, which is responsible for the supervision of the insurance sector in Ireland, has established guidelines and standards to improve insurers' corporate governance, and has been given powers to exercise regulatory sanctions in the insurance industry. The IMF nevertheless recommends reviewing the current on-site supervisory framework, strengthening the oversight and independence of actuaries, and enhancing public disclosures by insurers. However, given the fact that ISPs were superseded in 2003 by the more demanding Insurance Core Principles (ICPs), as well as the importance of changes expected to take place in Ireland's insurance supervisory framework, the IMF recommends carrying out a formal reassessment of the Ireland's compliance with ICPs.

General Overview

There is insufficient publicly available information regarding Ireland's compliance with the revised Insurance Core Principles (ICPs) issued by the International Association of Insurance Supervisors (IAIS) in 2003. In a 2001 Report on the Observance of Standards and Codes (ROSC), which uses the 1997 IAIS Insurance Supervisory Principles (ISPs) as a benchmark for assessing insurance supervision in Ireland, the International Monetary Fund (IMF) concluded that overall Ireland was in "substantial compliance" with the IAIS ISPs. It identified shortcomings, however, in reinsurance, corporate governance, internal controls, on-site inspections, monitoring of foreign operations, and market conduct monitoring. There was also a need for a more formal and transparent sanctioning framework. According to a 2006 IMF Financial System Stability Assessment (FSSA) Update, the insurance regulatory regime in Ireland has significantly improved since the 2001 IMF ROSC. The prudential regulatory framework is sound and in line with the relevant EU directives and IAIS ICPs. Furthermore, notable progress has been made in strengthening on-site and off-site prudential supervision. According to the same report, the Ireland Financial Services Regulatory Authority (IFSRA), which acts as Ireland's insurance supervisory authority, has established guidelines and standards to improve insurers' corporate governance. The IMF recommends reviewing the current on-site supervisory framework to enable an independent assessment of risk management and corporate governance practices of insurers. It also advises strengthening the oversight and independence of actuaries and enhancing public disclosures by insurers. However, given the fact that ISPs were superseded by the more demanding ICPs that also cover the reinsurance industry, as well as the importance of expected changes in Ireland's insurance supervisory framework, the IMF recommends carrying out a formal reassessment of Ireland's compliance with the ICPs. At the time of the IMF's 2006 FSSA Update, Ireland was in the process of transposing the European Union (EU) Reinsurance Directive. On July 15, 2006, Ireland became the first EU member state to adopt the Reinsurance Directive, as stated in the IFSRA 2006 Annual Report.

The main laws governing the insurance sector in Ireland are the 1989 Insurance Act, which was last amended in 2000, the 1995 Investment Intermediaries Act, the 2003 and 2004 Central Bank and Financial Authorities of Ireland (CBFSAI) Acts, and relevant EU Directives. The regulatory authority of the IFSRA, which was established by the 2003 CBFSAI Act, extends to all Irish financial institutions, including those previously regulated by the CBFSAI, the Department of Enterprise, Trade, and Employment (DETE), the Office of the Director of Consumer Affairs (superseded by the National Consumer Agency in May 2007), and the Registrar of Friendly Societies. Within the IFSRA, the insurance supervision department and the consumer directorate are responsible for the supervision of insurers, as well as prudential and market conduct regulation. Furthermore, the IFSRA has operational and budgetary autonomy, and is responsible for the regulation of all financial institutions for compliance with core principles in the banking, insurance, and securities sector, as well as compliance with the anti-money laundering (AML) and combating the financing of terrorism (CFT) regime, as stated in the 2006 Financial Action Task Force (FATF) Mutual Evaluation Report. It is also a member of the IAIS and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS), which provides advice to the European Commission, and ensures the implementation and coordination of legal acts in EU member states. Since 2004, the IFSRA has been given powers to exercise regulatory sanctions in the insurance industry, as noted in the 2006 IMF FSSA Update.

According to the IFSRA's 2006 Annual Report, 54 life insurance companies, 133 non-life insurance companies, and 168 reinsurance undertakings operated in Ireland in 2006. The number of insurance and reinsurance intermediaries however was nearly halved from 2005 to 2006. During the same period, total assets of insurance companies increased by 28% from 116 billion to 148 billion.

The Principles

ICP 1 Conditions for effective insurance supervision

II

The main laws governing the insurance sector in Ireland are the 1989 Insurance Act, which was last amended in 2000, the 1995 Investment Intermediaries Act, the 2003 and 2004 Central Bank and Financial Authorities of Ireland Acts, and relevant EU Directives. According to a 2006 IMF FSSA Update, the insurance regulatory regime in Ireland has significantly improved since the 2001 IMF ROSC. Furthermore, the prudential regulatory regime is sound and in line with the relevant EU directives and IAIS ICPs. On July 15, 2006, following the IMF's 2006 Update, Ireland became the first EU member state to adopt the Reinsurance Directive, as stated in the IFSRA's 2006 Annual Report. Nevertheless, there is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 2 Supervisory objectives

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003. According to its 2006 Annual Report, the IFSRA's main purpose is to "help consumers make informed financial decisions in a safe and fair market, and to foster sound, dynamic financial institutions in Ireland" (p. 4).

ICP 3 Supervisory authority

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003. The CBFSAI Act, which was adopted on May 1, 2003, established the IFSRA. The regulatory authority of the IFSRA extends to all Irish financial institutions, including those previously regulated by the CBFSAI, the DETE, the Office of the Director of Consumer Affairs, and the Registrar of Friendly Societies. Within the IFSRA, the insurance supervision department and the consumer directorate are responsible for the supervision of insurers, as well as prudential and market conduct regulation. Furthermore, the IFSRA has operational and budgetary autonomy and is responsible for the regulation of all financial institutions for compliance with the core principles in the banking, insurance, and securities sector, as well as compliance with the AML/CFT regime, as stated in the 2006 FATF Mutual Evaluation Report. The IFSRA is also a member of the IAIS and the CEIOPS, which provides advice to the European Commission, and ensures the implementation and coordination of legal acts in EU Member States.

ICP 4 Supervisory process

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 5 Supervisory cooperation and information sharing

II

According to the 2001 IMF ROSC, ISP 16 on Coordination and cooperation was "observed" (p. 7) and required no further corrective action. As stated in a 2006 IMF FSSA Update, Ireland has taken adequate measures to facilitate the exchange of information and expertise between different areas of supervision, and has made efforts to achieve a consistent approach in prioritizing supervisory resources across institutions. Furthermore, the supervisory responsibilities of the financial sector supervisory agencies have been transferred, enhanced and combined seamlessly into the IFSRA. The integrated supervisory framework, according to the Irish authorities, is intended to support better information flow between supervisors and those monitoring systemic risks, and to facilitate coordination among supervisory and monetary authorities should a problem arise. Nevertheless, there is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 6 Licensing

II

According to the 2001 IMF ROSC, ISP 2 on Licensing was "observed" (p. 6) and no further corrective action was required. Nevertheless, there is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 7 Suitability of persons

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003. In its 2006 FSSA Update, the IMF recommends strengthening the IFSRA's powers to sanction persons who do not meet the "fit and proper" testing requirements.

ICP 8 Changes in control and portfolio transfers

II

According to the 2001 IMF ROSC, ISP 3 on Changes in control was "observed" (p. 6) and no further corrective action was required. Nevertheless, there is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 9 Corporate governance

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003. According to the 2001 IMF ROSC, ISP 4 on Corporate governance was "observed at level of necessary criteria" (p. 7), due to the lack of a specific corporate governance regime for insurers. Although the IFSRA has established guidelines and standards to improve insurers' corporate governance, the IMF 2006 update recommends reviewing the current on-site supervisory framework to enable an independent assessment of corporate governance practices of insurers, as stated in a 2006 IMF FSSA.

ICP 10 Internal control

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003. According to the 2001 IMF ROSC, ISP 5 on Internal control was "observed at level of necessary criteria" (p. 7) due to a lack of formal program and limited capacity to direct and monitor the internal control systems of insurers.

ICP 11 Market analysis

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 12 Reporting to supervisors and off-site monitoring

II

According to the 2001 IMF ROSC, ISP 12 on Financial Reporting was "observed at necessary level" (p. 7). However, the IMF highlighted a lack of standards for financial reporting purposes. Furthermore, statutory reporting was only required on an annual basis, and financial condition reports for life insurers were not mandatory. Following the 2001 IMF ROSC, Ireland has shown improvements in strengthening the off-site prudential supervision framework, and the IFSRA has "expanded the role of actuaries in certifying the financial performance and conditions of insurers" (p. 26), as noted in the 2006 IMF FSSA Update. Nevertheless, there is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 13 On-site inspection

II

According to the 2001 IMF ROSC, ISP 13 on On-site inspection was "observed at necessary level" (p. 7). However, the IMF highlighted the lack of resources to carry out a formal inspection program. As noted in a 2006 IMF FSSA Update, Ireland has shown improvements in strengthening the on-site prudential supervision framework since its participation in the Financial Sector Assessment Program in 2000. Nevertheless, there is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003

ICP 14 Preventive and corrective measures

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 15 Enforcement or sanctions

II

According to the 2001 IMF ROSC, ISP 14 on Sanctions was "observed at necessary level" (p. 7). However, the IMF recommended implementing a more formal and transparent sanctioning framework. Since 2004, the IFSRA has been given powers to exercise regulatory sanctions in the insurance industry, as noted in the 2006 IMF FSSA Update. Nevertheless, there is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 16 Winding-up & exit from the market

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 17 Group-wide supervision

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003

ICP 18 Risk assessment and management

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003. In its 2006 FSSA Update, the IMF recommends reviewing the current on-site supervisory framework to enable an independent assessment of risk management practices of insurers. It also advises strengthening the oversight and independence of actuaries, and enhancing public disclosures by insurers.

ICP 19 Insurance activity

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003. According to the 2001 IMF ROSC, ISP 10 on Reinsurance was "observed although at level of necessary criteria for Reinsurance Principle" (p. 7), due to a lack of ongoing supervision of reinsurers. As stated in a 2006 IMF FSSA Update, formal regulation and supervision of the reinsurance industry remain a challenge.

ICP 20 Liabilities

II

According to the 2001 IMF ROSC, ISP 7 on Liabilities was "observed although at level of necessary criteria for Reinsurance Principle" (p. 7). The IMF recommended actuarially monitoring long tail compensation class liabilities. Nevertheless, there is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 21 Investments

II

As stated in the 2001 IMF ROSC, ISP 6 on Assets was "observed although at level of necessary criteria for Reinsurance Principle" (p. 7). There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 22 Derivatives and similar commitments

II

According to the 2001 IMF ROSC, ISP 9 on Derivatives and off-balance sheet items was "observed although at level of necessary criteria for Reinsurance Principle" (p. 7). There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 23 Capital adequacy and solvency

II

As noted in the 2001 IMF ROSC, ISP 8 on Capital adequacy and solvency was "observed although at level of necessary criteria for Reinsurance Principle" (p. 7) due to a relatively low minimum capital by international standards. There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 24 Intermediaries

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003. Insurance intermediaries are regulated under the 1995 Investment Intermediaries Act. From 2005 to 2006, the number of insurance and reinsurance intermediaries was nearly halved.

ICP 25 Consumer protection

II

According to the 2001 IMF ROSC, ISP 11 on Market Conduct was "observed subject to passage of impending legislation" (p. 7). The IMF noted that Ireland would comply with this principle subject to implementation of the 1999 Insurance Bill. It also recommended transferring all market conduct supervision from the CBFSAI to a single regulatory authority. As stated in a 2006 IMF FSSA Update, the IFSRA adopts "an integrated approach that balances consumer protection, prudential supervision and financial stability" (p. 24). Furthermore, the IFSRA has made significant progress in market conduct regulation and supervision, and a cross-sectoral consumer protection code was expected to come into effect in 2006. Nevertheless, there is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 26 Information, disclosure & transparency towards the market

II

In its 2006 FSSA Update, the IMF recommends strengthening the oversight and independence of actuaries, and enhancing public disclosures by insurers. Nevertheless, there is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 27 Fraud

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003.

ICP 28 Anti-money laundering/ Combating the Financing of Terrorism

II

There is insufficient publicly available information regarding Ireland's compliance with the revised ICPs issued by IAIS in October 2003. According to a 2006 FATF Mutual Evaluation Report, the IFSRA is responsible for the regulation of all financial institutions for compliance with the AML/CFT regime, in particular with the aim of implementing EU's AML directives. Furthermore, as reported on the IFSRA's website, Guidance Notes on the Criminal Justice Act with regards to Money Laundering were adopted in 2004 to inform life insurance companies and intermediaries on AML/CFT issues.