Central Bank Publishes Guidance on the Establishment of an EEA Branch of an Insurance Undertaking

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Central Bank Publishes Guidance on the Establishment of an EEA Branch of an Insurance UndertakingThe Central Bank of Ireland (the "Central Bank") has now published updated guidance for Irish authorised insurers proposing to establish a branch operation in another EEA Member State (the "Guidance").

The Guidance replaces the previous Central Bank guidelines on this topic dated May 2009 and importantly, it now reflects the relevant requirements of and references to the Solvency II regime which was introduced on 1 January 2016. The Guidance will be of particular interest to those insurers considering the establishment of a new Irish head office in the aftermath of Brexit where the establishment of a single or multiple branch operation(s) in other EEA Member States may also represent a sensible business strategy.

The Guidance should be read in conjunction with the provisions of the EU (Insurance and Reinsurance) Regulations 2015 (the "2015 Regulations") and also the recently-published EIOPA "Decision of the Board of Supervisors on the collaboration of insurance supervisory authorities' referred to as the "Revised General Protocol".

Notification to the Central Bank

Similar to the previous regime, an insurer wishing to carry on business in another EEA Member State on a freedom of establishment basis is required to submit a notification to the Central Bank of its intention to do so. The Guidance states that the Central Bank will review and assess the completeness and accuracy of the information provided by an insurer as part of the notification process. Helpfully, Annex 1 to the Guidance provides a checklist detailing the information which must be provided to the Central Bank as part of an insurer's notification. The Central Bank requires that this checklist must be completed and signed-off by a responsible person as part of the notification to the Central Bank.

Within 3 months of receiving a completed application from the insurer, the Central Bank will communicate this information to the national supervisory authority of the Member State in which the proposed branch is to be established (the "Host NSA"), along with a certificate of solvency which confirms that the Solvency Capital Requirement and the Minimum Capital Requirement are covered by the insurer concerned.

Information requirements

The Checklist sets out the specific information to be provided to the Central Bank as part of an insurer's notification covering the following areas:

  • General applicant details
  • Information relating to the scheme of operations e.g. nature of risks to be covered 
  • Branch information e.g. specific details of the branch's activities and organisational structure, branch manager, etc.
  • Market information e.g. target market for branch business, distribution and marketing arrangements, etc.
  • Outsourcing arrangements (if applicable)
  • Risk oversight information e.g. how branch operations are covered in an insurer's ORSA
  • Financial projections (e.g. 3 year projections for non-life insurers and 5 year projections for life insurers)
  • Other relevant information

Annex 2 to the Guidance lists the relevant Quarterly Reporting Templates which may be required to be submitted as part of an insurer's application.

When can the new branch commence activity?

In accordance with the 2015 Regulations, a newly-established branch can commence activity on the earlier of:

  • the date upon which the Central Bank has received the communication from the Host NSA relating to any general good requirements to be imposed, or
  • the expiry of two months after the date on which the Host NSA received the complete notification from the Central Bank.

In theory, an insurer may have to wait a total 5 months before it can commence writing insurance business from the date of submission of a complete application to the Central Bank. However, in our experience, engaging with the Central Bank and other Host NSAs in a positive and proactive manner helps to ensure that these timelines are managed as efficiently as possible. For example, in the case of new authorisations, the Central Bank will accept a draft of any branch notification in parallel with reviewing the head office application and will provide feedback to the applicant prior to formal authorisation. This means that once the insurer receives its authorisation, the Central Bank will file the requisite notification with the Host NSA almost immediately after the insurer  has been authorised.

Contributed by Catherine Carrigy, John Larkin of William Fry.