On 31 January 2022, the Central Bank of Ireland (the Central Bank) published much-anticipated Guidance on the Use of Service Companies for Staffing in the Insurance Sector (the Guidance) following a 2021 industry consultation process (CP 144).
The final form Guidance is substantially similar to the draft guidance issued for consultation last year, details of which can be found in our previous article available here. However, one important distinction to note is the perceived watering down of the requirement for an undertaking to allocate six-months’ working capital within the service company. The Guidance states that “an undertaking could consider “, a potentially significant dilution of the consultation version which stated that “consideration should be given “.
This change comes following industry opposition to the proposed use of such funds and is likely to be seen by (re)insurers as an important concession that allows undertakings opt to include contractual provisions that ensure continuity of service rather than having to tie up capital equivalent to six-months’ working capital.
The Central Bank expects (re)insurers to have conducted a review and, where appropriate, amendment of existing staffing arrangements within 12 months of the implementation of the Guidance (i.e. by 31 January 2023).
Our Insurance & Reinsurance Department is in the process of drafting agreements for clients which incorporate the Central Bank’s Guidance. For further information on the Guidance or for assistance in drafting Guidance compliant agreements, please reach out to a member of our Insurance & Reinsurance Department or your usual William Fry contact.
Contributed by James Grogan