In May 2023, the Central Bank of Ireland (CBI) published its report analysing the responses received from Irish (re)insurers following a survey issued in Q4 2022 on the impact of emerging technology and digitalisation platforms across the insurance value chain (Survey Report).
In conducting the survey, the CBI’s stated aim was to garner information to enable it to anticipate and adapt to the changing digitalisation landscape in the Irish insurance industry. The Survey Report was based on questionnaire responses received from 44 life, non-life and reinsurance firms in the Irish market.
From an insurance supervision perspective, the CBI has made it clear that Digitalisation and Technology are amongst its key priorities for 2023. In a recent speech on supervisory priorities (see here), Domhnall Cullinan, the CBI’s Director of Insurance Supervision, explained that the analysis of the survey findings would inform the CBI’s supervisory strategy and support its relevant engagements about digitalisation-related topics. The survey exercise was designed to complement previous work undertaken by the CBI on data ethics.
Overall, the Survey Report indicates that Ireland’s (re)insurance sector is presently at a relatively early stage in terms of the digitalisation of business models and the use of innovative technologies. For the most part, the Survey Report also indicates that the pace of change over the next three years will be ‘steady’ rather than ‘transformational’, with the initial focus of digitalisation being on improving efficiencies within (re)insurers. According to the Survey Report, the main challenges to digitalisation identified by (re)insurers include cyber security, data and privacy management concerns, operational issues and general skills shortages.
Some of the key statistics emerging from the Survey Report include that:
- 75% of respondents have a digital strategy to manage digitalisation which includes, or plans to include, a risk management framework.
- Only one of the respondents surveyed stated an intention to be fully digitalised within the next three years.
- Two respondents indicated that they had no arrangements for increasing digitalisation within the next three years.
- 33% of respondents stated that their board members and/or senior managers had not received training about digitalisation risks in the previous two years.
The Survey Report acknowledges that the level of digitalisation and the type of innovative technologies deployed varies significantly from firm to firm. However, the CBI emphasises that it is of fundamental importance that all firms have a clear strategy and exercise robust oversight as their digitalisation journey progresses. The sustainability of business models over the long term is another important consideration highlighted in the Survey Report. Interestingly, the CBI suggests that “robust discussion and challenge” at the Board and senior management level may be required to consider digitalisation-related opportunities and risks fully.
The Survey Report also highlights that using technologies such as cloud computing and artificial intelligence was often facilitated by a relationship with a group or third parties. The CBI underlines that firms should ensure that these relationships are managed in line with its cross-sectoral guidance on both outsourcing and operational resilience.
Going forward, the Irish (re)insurance sector can expect an increasing supervisory focus from the CBI on how all insurance business models and risk management frameworks are evolving due to digitalisation.
If you have any questions on this topic, please contact any member of our Insurance Team or your usual William Fry contact.
Contributed by Catherine Carrigy & Tara McCormack