Post Reinsurance Directive and Irish Implementation Issues

1
Post Reinsurance Directive and Irish
Implementation Issues
Scott McIntosh Mike Frazer Insurance Institute of
Dublin 27 November 2007
2
Agenda

• EU Reinsurance Directive
• Key Elements
• Observations and Lessons
• Irish Implications
• Application to Solvency II

3
EU Reinsurance Directive

• The Reinsurance Directive (RID) passed by
  European Parliament on 7 June 2005
• Purpose to regulate reinsurance across Europe vs.
  patchwork of inconsistent reinsurance regulation
  across Europe (no regulation in Ireland)
• Member states given until 10 December 2007 to
  implement RID into national law
• Seen as an interim measure introducing a minimum
  level of supervision across Europe ahead of
  Solvency II

4
Key Elements of the RID

• Requirement that all EU reinsurers be authorised
• Single passport regime for reinsurers across the
  EU
• Prudential supervision rules governing solvency
  margins and minimum guarantee fund apply
  throughout EU
• Optional regulation of SPRVs and Finite
  reinsurance
• Portfolio transfer mechanism
• Elimination of collateral requirements in some EU
  countries

5
Observations and Lessons

• Importance of early involvement before the first
  draft gets created
• Importance of understanding and communicating
  special needs of Irish industry (i.e. captives,
  SPRVs, international nature of business, smaller
  cos., finite re)
• Difficulty with long timelines environment and
  personnel changes had big impact (e.g. Gen Re,
  DoF)
• Pluses and minuses of Ireland going first
• Consultation a learning process for both
  Regulator and Industry

6
Irish Implications of RID

• Moving first did help Ireland with regulatory
  certainty
• Passporting and simplified portfolio transfer
  mechanism facilitate hub and branch single
  legal carrier is the most efficient use of
  capital
• Ireland is an attractive location for EU base for
  global reinsurers
• tax, common law legal environment, service
  infrastructure, accounting basis, English
  language
• Captive carve-out to address specific issues

7
Application to Solvency II

• First draft is done
• Fewer home country options
• Big Bang implementation
• Lobbying takes place in Brussels
• Blocks of thought North v. South, Big v. Small
• Size of insurance market dwarfs reinsurance
  market
• Need to identify issues NOW and present a viable
  solution
• Capital model is just one element pillar II
  (risk management) and pillar III (reporting)
  equally if not more important