Following the withdrawal of the United Kingdom from the European Union, UK authorised insurance intermediaries lost their regulatory permissions under the Insurance Distribution Directive (IDD) to carry on insurance distribution activities in respect of EU/EEA based risks and commitments.
We are aware that a number of UK-based Managing General Agents (MGAs) are continuing to assess the most suitable operating model for their post-Brexit operations. To assist with these considerations, we have outlined the process for registering an Irish authorised insurance intermediary with the Central Bank of Ireland (CBI) and additional key information to be aware of.
Timing: the CBI has a statutory period of 90 working days to consider an application. Based on current practice, the CBI will not commence its review and start the 90 working day clock until all required documentation is submitted and the application is deemed ‘complete’. In addition, any requests for further information will ‘stop the clock’ until a response has been submitted by the applicant.
Authorisation process: set out below is a high-level overview of the authorisation process:
- arrange a preliminary meeting with the CBI to outline the proposal;
- prepare and submit the completed application;
- the CBI’s review of the application is an iterative process during which it will issue comments and request additional information and documentation;
- once the CBI is satisfied with the application, it will issue an ‘authorisation in principle’ letter, which means that the CBI is minded to grant its approval once certain conditions are satisfied (eg, evidence of professional indemnity insurance cover); and
- once all conditions are satisfied, the CBI will issue the final authorisation and the intermediary can commence carrying on business in Ireland.
Application information: the main categories of information required for
the application are:
- legal and group structure and shareholder information;
- proposed regulated activities, which may include acting as a retail broker, managing general agent and/or wholesale broker;
- business plan (focussing on the key commercial objectives, client base, resources and infrastructure to support the business, financial projections and solvency information, approach to business growth, outsourcing arrangements and third-party arrangements);
- programme of operations (which would include details of the proposed governance structure and resourcing arrangements, including the fitness and probity of key personnel, along with details of compliance/internal audit arrangements, risk monitoring, outsourcing, IT arrangements, business continuity planning);
- confirmations that the intermediary has appropriate governance arrangements and internal systems, controls and procedures in place to comply with its legal and regulatory obligations; and
- other key supporting documentation including, passporting notifications; professional indemnity insurance cover; Revenue tax clearance certificate and a client premium bank account statement.
MGAs: MGAs are typically subject to enhanced scrutiny during the authorisation process due to the increased risks associated with the MGA business model. Where the applicant will operate as an MGA, the application will also require specific details on:
- the services that the applicant will provide as an MGA;
- the level of authority that the applicant will have under the delegated underwriting authority agreement(s);
- the process for entering into a new delegated underwriting authority agreement(s) including the due diligence that the applicant will carry out initially and on an on-going basis in respect of the relevant insurance undertaking(s);
- contingency plans and processes in place in the event of an insurance undertaking(s) exiting the market; and
- a comprehensive breakdown of the roles and responsibilities of the relevant parties (ie, the applicant, the insurance undertaking and any retail broker(s)) in relation to policy administration (ii) marketing (iii) underwriting (iv) product development (v) pricing and (vi) claims management (including reserving).
UK branch: many UK-based insurance clients are opting to establish a third country branch in the UK. We have previously worked on a number of authorisations and approvals of third country branches in the UK to permit intermediaries to carry on business in this manner. The CBI is comfortable with this structure once all regulatory requirements and expectations are satisfied, particularly as regards substance in Ireland.
Substance: one of the CBI’s key areas of focus in assessing an application for authorisation is substance in Ireland. In this regard, the CBI requires the ‘heart and mind’ of an Irish regulated entity to be located in Ireland. This typically means that both the regulated aspects of the business (the heart) and strategic decision-making (the mind) must be located in Ireland. There are no hard and fast rules as regards substance and the overall staffing model will depend on the nature, scale and complexity of the business.
Dual-hatting: the CBI will allow some amount of flexibility when it comes to dual-hatting provided there is a sufficient degree of overlap within those functions to allow them to be performed by the same individual and it being demonstrated to the satisfaction of the CBI that the individual will have sufficient capacity and time available in a working week to discharge both functions to the required standard.
Minimum capital requirements: an insurance intermediary is not subject to any minimum capital requirements, however, the CBI will expect the intermediary to be solvent at all times.
Supervision: intermediaries are generally ranked as ‘low impact’ under the CBI’s supervisory framework, the Probability Risk and Impact System (PRISM). Such intermediaries are subject to a lower level of supervision than imposed by the CBI on higher impact rated firms such as banks or insurers and are typically monitored by way of advertising monitoring, themed inspections, general inspections and mystery shopping.
Consumer protection requirements: in addition to any general good requirements imposed in other member states where the intermediary carries on business, the intermediary will be subject to Irish consumer protection requirements, which include:
- Consumer Protection Code 2012 (as amended): applies to all intermediaries carrying on insurance business in Ireland with Irish customers/consumers and contains general and specific provisions relating to insurance including requirements relating to premium handling and contact with consumers, information that must be provided to consumers before entering into a contract for a product or service, records, errors, rebates and claims processing.
- Minimum Competency Code 2017 and the Minimum Competency Regulations 2017: set out minimum professional qualifications that must be obtained by persons performing certain ‘specified functions’ within Irish financial service providers.
- Fitness and probity standards: sets out minimum fitness and probity standards that persons proposed to perform controlled functions (CFs) and pre-approval controlled functions (PCFs) must abide by. PCFs also require the CBI’s approval prior to appointment.
Professional indemnity insurance: insurance intermediaries are required to hold ring-fenced professional indemnity insurance or a comparable guarantee against liability arising from professional negligence and covering the whole territory of the member states for not less than €1,300,380 per claim and €1,924,560 in aggregate per year for all claims.
Costs: the CBI does not currently charge a fee for assessing applications. Therefore, the main costs associated with the application process would be expenditure on professional advisers’ fees, principally legal and actuarial advisers.
Levies: once authorised, an annual industry funding levy is payable to the CBI. For insurance intermediaries, the minimum annual levy is €1,025.
Should you have any further questions in relation to the establishment process in Ireland, please do not hesitate to reach out to any member of our team who would be delighted to assist. Having advised on a significant number of Brexit related authorisation projects we are acutely aware of the regulator’s expectations and have successfully guided numerous clients through the authorisation process and onto establishment in Ireland.