Establishing an Insurance Intermediary in Ireland - Key Considerations

Home Knowledge Establishing an Insurance Intermediary in Ireland – Key Considerations

Establishing an Insurance Intermediary in Ireland - Key Considerations

February 28, 2017

Introduction

This briefing explains the registration process and the ongoing supervisory controls to which an insurance intermediary (hereinafter referred to as the “Applicant”) is subject. The process applies equally to reinsurance mediation as it does to insurance mediation.

Advantages of Ireland

Firstly, there are many advantages to locating in Ireland:

Ireland is a full member of the European Union and has implemented the Insurance Mediation Directive so that insurance intermediaries registered with the Central Bank of Ireland (the “Central Bank”) can service all other EEA markets without the need for further registration;
It is a well-developed insurance market with many of the world’s leading (re)insurers based here;
Ireland’s close proximity to the UK enables easy interaction with the key London market;
The Central Bank is generally regarded as a responsible yet responsive regulator;
No application fee for new registrations;
The standard rate of corporation tax on trading income is 12.5%;
No Irish stamp duty or premium taxes are payable on insurance policies where the risk is located outside Ireland; and
With a plentiful supply of top quality legal, actuarial, accounting and insurance management service providers, there is an experienced pool of service providers.

IMD Regime

Applicant must first ensure it falls within the definition of “insurance mediation” activities under the European Communities (Insurance Mediation) Regulations 2005 (the “IMD Regulations”). For an intermediary currently operating in the UK market, this should be a straight-forward analysis assuming the activities to be carried on in Ireland are along similar lines. However, the carrying-on of any ancillary investment-type activities may require a separate registration pursuant to the Investment Intermediaries Act 1995 or pursuant to the MiFiD Regulations.

The IMD Regulations are expected to be replaced by new regulations transposing the Insurance Distribution Directive (the “IDD”) into Irish law. The IDD will enter into force in 23 February 2018. However, there is a transitional provision for intermediaries registered under the IMD Regulations until 23 February 2019 meaning that they must comply with the relevant Irish regulations implementing Article 10(1) of the IDD by this later date. It is important at the outset of an application to consider the implications of the IDD so that compliance with the relevant requirements can be managed by the end of the transitional period.

Application to the Central Bank

An Applicant must focus on preparing an application containing prescribed information, which is submitted to a dedicated registration team in the Central Bank. The Central Bank will typically issue a series of follow-up queries seeking additional information. Once the application is clear of comments from the registration team, it will be submitted to a senior management committee for formal approval. An Applicant cannot commence business until the Central Bank has granted the formal registration.

The information required by an Applicant is set out in the registration form and guidelines issued by the Central Bank and includes the following:

Structural Organisation e.g. legal structure and relevant corporate information (as applicable);
Business Plan including relevant financial projections (for at least 12 months) and solvency information;
Programme of Operations including governance and staffing arrangements, compliance, outsourcing; product oversight and governance, etc.
Professional Indemnity Insurance;
Fitness and probity of directors and senior managers including completed Individual Questionnaires for relevant individuals;Sh
areholder Information; and
Regulatory Background.

“Mind and management” Test

The Central Bank expects an Applicant to have senior management operating from Ireland. This is known as the “mind and management” test. In general, the requirement is to ensure the central management is located within the “head office” or “principal place of business”. The following functions must be located in Ireland:

Decision-making at board level
Financial control function
Risk and compliance function

Although the Central Bank recognises that there is no ‘formula’ for meeting the “mind and management” test, it follows that there would need to be a strong senior management presence in Ireland. It is important to remember that the Central Bank will examine each application based on its own particular circumstances so there may be some degree of flexibility afforded on a case-by-case basis.

Passporting Notification

If an Applicant proposes to provide insurance mediation services from a branch (freedom of establishment) or on a cross-border basis (freedom of services) elsewhere in the EU, a separate Passporting Notification Form must be filed with the Central Bank. This provides details of the relevant Member States where the Applicant proposes to passport its activities. The Central Bank will then transmit the information to the regulatory authority of the relevant Member State(s) within one month of its receipt. Applicants are required to demonstrate to the Central Bank how they will be in a position to manage their activities in other EU Member States.

Application Time-line

A completed application for registration of the Applicant should take approximately 2-3 months to be assessed by the Central Bank.

Ongoing Supervision

Insurance intermediaries are supervised on an ongoing basis by the Central Bank. The principal requirements with which insurance intermediaries are required to comply derive from the Insurance Mediation Directive. As a regulated financial service provider (“RFSP”), an Applicant will be obliged to comply with the requirements of the Central Bank, primarily, the following:

Fitness and Probity

On the basis that the Applicant is an RFSP and its employees and directors hold positions which are deemed to be either “controlled functions” or “pre-approval controlled functions” under the Central Bank’s Fitness and Probity regime, the Applicant and those relevant persons will be obliged to comply with the standards issued by the Central Bank (the “Standards”).

As an initial step, the Applicant will need to determine those persons working for it that fall into the controlled functions (“CF”) and pre- approval controlled functions (“PCF”). Following this analysis a due diligence must be conducted to ensure that those persons are indeed fit and proper to fulfil the role and that the Applicant is satisfied that those persons can and will comply with the Standards.

For those persons proposed to hold a PCF (generally board level and senior executive management roles including branch managers), their appointment must be approved by the Central Bank in advance. For those persons in CF positions, the Applicant must conduct a required level of due diligence and satisfy themselves that those persons are fit and proper, comply with the Standards and will continue to comply with the Standards.

Minimum Competency Code

With regard to the specific requirements stemming from this, the Central Bank issued its Minimum Competency Code (the “MCC”) which establishes minimum professional standards across all RFSPs with particular emphasis on areas dealing with consumers. The MCC applies to all persons performing CFs or PCFs on a professional basis and where they are involved in customer-facing roles including advising, offering and arranging financial products and also certain claims work.

The Fitness and Probity regime mentioned previously requires that compliance with the MCC (where applicable) is one of the key considerations which may be taken into account in deciding whether a person is fit and proper for the performance of a CF or PCF. An Applicant will be required to ensure that those employees who are required to comply with the MCC do in fact comply and continue to comply with the obligations on an ongoing basis.

Consumer Protection Code

The Consumer Protection Code (“CPC”) contains a set of common rules applicable to most RFSPs including sector-specific rules relevant to insurance intermediaries (reinsurance intermediaries are excluded from the scope of the CPC). The CPC is primarily aimed at protecting Irish ‘consumers’ (as defined therein); however, it also applies general principles of fair dealings in respect of all Irish customers of RFSPs. In the context of cross-border business, particular advice may need to be taken to determine if Irish risk or consumers necessitate compliance with the CPC and/or MCC.

Levies

Currently, the Central Bank does not charge a fee to applicants seeking to become authorised as insurance intermediaries. However, once authorised, an Applicant would be subject to an annual Central Bank industry funding levy which varies considerably depending on the complexity of the Applicant’s business calculated by the Central Bank using certain impact metric data. Similarly, once authorised, an Applicant may be liable to pay an annual levy to the Financial Services Ombudsman’s Bureau which is the independent statutory body dealing with complaints from consumers of RFSPs.