The rise of Ireland to the position of insurance powerhouse has been somewhat of a revolution, heard attendees of the recent European Insurance Forum in Dublin, with Sarah Goddard, CEO of the Dublin Insurance and Management Association (DIMA), charting the path the domicile has taken since 1999.
The rise of Ireland to the position of insurance powerhouse has been somewhat of a revolution, heard attendees of the recent European Insurance Forum in Dublin, with Sarah Goddard, CEO of the Dublin Insurance and Management Association (DIMA), charting the path the domicile has taken since 1999.
She said: “When I see the transformation from when this conference started in 1999, we were talking about Ireland becoming the Bermuda of Europe, and in that period of time, Ireland has become the island of an international industry.”
But she maintained that Ireland has not taken risky chances on the road to 2016. “We are a risk industry, we are cautious by nature in certain areas. We weigh risk, we transfer risk, we look at risk as fundamental to our activity.”
Looking to the future, Goddard suggested the industry needs to be prepared to take on a different sort of risk, to ensure that the future of international insurance and reinsurance in Ireland stays on the path to success.
James Grennan, head of A&L Goodbody’s insurance group and partner of the corporate department, explained that the reinsurance and insurance sector has reached a challenging place and asked: “Are we on the road to revolution or the road to nowhere?”
Grennan asked panellist Des Potter, managing director and head of GC securities in Europe, the Middle East and Africa (EMEA) at Guy Carpenter, to set the scene of what he believes the insurance industry is going to look like in 2026.
Potter said the insurance and reinsurance industry will remain vibrant in the future. He claimed that one of the challenges the world will face will be in new emerging markets, suggesting that there will be growth in demand for risk insurance and changes in the industry, including the effects of climate change and population growth. He explained that these changes will lead to a high demand for water, food and natural resources, and will affect housing prices.
Potter suggested these changes will lead to an “increasing demand for insurance and reinsurance and [will increase] the strain on the public purse”.
He said that, because of increasing demand, governments will use the insurance and reinsurance sector more, meaning corporates will expand, their captives will be bigger and demands for transfer volatility will increase.
He said: “This will be the cause of a very much changed and revolutionised reinsurance and insurance sector.”
An audience member asked Potter whether the captive sector will be in a good position come 2026, to which he responded: “While corporates continue to get bigger and continue to feel uncomfortable spending money in the reinsurance and insurance sector, and instead look to retain more risk, I do think the captive industry will continue to grow.”
However, according to Potter, the captive industry will have to manage its risk very carefully and will have to think quite creatively about the types of reinsurance that will be needed to make sure undue pressure is not put on the balance sheets of parents.
Another big discussion point was the recent implementation of Solvency II. The directive, which kicked into action on 1 January this year, has now been adopted across Europe. Each of the 28 European member states are currently undergoing the transitional stage of the implementation.
Most pressingly under Solvency II, insurers are required to submit annual and quarterly reports in multiple formats, the first of which are due on 20 May.
Ronan Mulligan, director of the PwC insurance practice, suggested that the understanding of the industry, and its resilience, has improved because of Solvency II, although challenges do remain.
He asked: “Where do we go next, what does the future hold for Solvency II, is everyone ready for Solvency II, are regulators ready for all the information they are about to receive, and is the industry ready to supply everything they need to supply?”
Manuela Zweimueller, director and head of department regulations at the European Insurance and Occupational Pensions Authority claimed that regulators have been preparing for a number of years for all the information they are going to receive in May.
She said: “We are excited about the amount of data we are going to receive.”
Regulators will be looking for trends in the data, which, in the long run, will allow them to be more efficient, explained Zweimueller.
She noted: “Having this data and analysing it will make us, as regulators, more efficient. We’re ready, I hope the industry is ready.”
According to Andrew Coffey, CEO of the Central Bank of Ireland, regulators have set themselves a big task.
He argued that consistency among regimes is key to making sure there is financial stability in the insurance industry.
Coffey suggested that Solvency II has evolved and is a foundation on which future regulations are going to be built, but added that he is unsure about what sort of timeframe this will happen over.
Philip Whittingham, head of model validation and risk governance at XL Catlin, revealed that he is naturally concerned about regulatory burdens. He said: “XL Catlin has much sympathy for what regulators are trying to achieve.”
Bermuda was formally recognised as being fully equivalent with Solvency II by the European Commission late last year, meaning that the regulatory standards applied to European reinsurance companies and insurance groups in Bermuda are now in accordance with the requirements of Solvency II.
Crucially, though, Bermuda kept captives and special purpose insurers out of the scope of Solvency II, thanks to the island’s compliance with International Association of Insurance Supervisors (IAIS) standards.
Mulligan asked panellist Leila Madeiros, senior vice president, deputy director and corporate secretary of the Association of Bermuda Insurers and Reinsurers: “Bermuda has had a success in achieving equivalence for Solvency II and that’s boomed the Bermuda industry. Were there lessons to be learnt from what you did there?”
Madeiros said: “I think Bermuda viewed the challenge or invitation to go for Solvency II. Bermuda recognised that there was a common framework being arranged in Europe.”
Maderios explained that the benefits included a common language and regulatory platforms, adding that it can get extremely expensive to arrange a variety of different regulatory platforms.
She suggested that one benefit from being non-EU was that Bermuda got there before the rest of Europe. Bermuda had its first IAIS assessment five years go. Maderios noted that the benefits achieved from doing that meant the jurisdiction was working to Solvency II way ahead of the implementation date, and had time to transpose the Solvency II framework in advance.
Maderios added that the regulators’ timetables seem to be aggressive, and that the industry should let the Solvency II framework find its way, however, she suggested that the outcome of the reporting will reflect that. She concluded by asking: “Can we hit the pause button just a little bit?”
