Home Knowledge Governor Makhlouf addresses the Insurance Ireland Annual Industry Lunch

Governor Makhlouf addresses the Insurance Ireland Annual Industry Lunch


At the recent Insurance Ireland Annual Industry lunch held on 16 June 2022, Governor Makhlouf provided feedback to the industry and highlighted current areas of focus and longer-term trends. Perhaps the most significant point made by the Governor was to state that the CBI has developed draft guidance on intra-group transactions, and a consultation process is expected to open shortly.

Insurance and the economy

The Governor noted the important role played by the insurance sector in Ireland as follows:

  • Irish insurers wrote over €99bn of gross premiums in 2021, more than two-thirds of which was written ‘cross border’
  • the sector’s total balance sheet assets reached over €538bn at the end of last year, representing a 55% increase in 5 years
  • the insurance market here is the fifth largest in the EU in terms of assets, whilst the reinsurance market is the second largest.

Emphasis was placed on the consumer protection goal of the  Solvency II regime and how an effective and well-designed Capital Markets Union (CMU) at a European level could bolster financial stability and improve resilience. The Central Bank of Ireland (CBI) view is that this could lower costs, improve choice and strengthen protections for consumers and investors, especially in cross-border transactions.

The insurance sector in Ireland

The Governor provided the following overview of the sector:

  • almost 200 firms are under the supervision of the CBI, and  they  vary significantly in their nature and scale
  • new authorisation enquiries are welcomed, and the CBI remains committed to an open and transparent application process
  • in 2020 and 2021, the CBI authorised 15 firms and oversaw 52 portfolio transfers and material changes in business plans. This represented a marked increase in the volume of applications over previous years
  • the insurance sector proved to be resilient throughout the pandemic, with solvency coverage ending 2021 at 187 per cent, meaning the sector as a whole entered 2022 with a strong capital base.

The Governor noted that whilst the Russian war is first and foremost a humanitarian tragedy, the economic impact is being felt in Europe in terms of negative sentiment effects, greater uncertainty and higher inflation. The Governor noted that:

  • the majority of (re)insurers have limited business or investment exposure to Russia, Ukraine and Belarus. These countries accounted for around €675m of (re)insurers investments at the end of 2021, equating to just 0.15 per cent of their total investments. The majority of exposure was via investment funds held in respect of unit-linked savings business; and
  • all (re)insurers will need to face the secondary effects of the conflict on economic and financial market conditions, including the risks related to:
    • stretched asset valuations
    • the possibility of sudden market corrections
    • potential exogenous economic shocks
    • inflationary pressures
    • general financial and operational risks associated with increased volatility and uncertainty across the globe.

The Governor also noted the increase in inflation to 8.1 per cent in May, and that energy prices stood 39.2 per cent above their levels a year ago. He also noted that high levels of inflation over a prolonged period would have more of an adverse impact on non-life (re)insurers (including health insurers) than life (re)insurers due to differences in the way claims are indemnified. Potential impact on insurance costs, claims costs and profitability levels were also highlighted. 

The Central Bank’s approach to regulating insurance

The Governor outlined how the CBI approach is guided by its mission to serve the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers and the wider economy. 

Areas of focus

The following areas of focus were outlined:

Climate Change

  • The financial system must remain resilient to the risks posed by climate change so that it is capable of supporting the transition to net zero.
  • Action is required from communities, businesses, households, the entire financial system, policymakers and the insurance industry.
  • The new CBI Climate Risk and Sustainable Finance Forum is to meet later this month to build a shared approach to the understanding and management of the financial risks and opportunities posed by climate change.
  • CBI is to consult shortly on draft guidance on climate change risks for insurance undertakings.

Intra-Group Transactions

  • Risks associated with reliance on related group entities must be considered to a sufficient degree.
  • CBI has developed draft Guidance on intra-group transactions with the aim of being more transparent about our expectations. Feedback will be invited shortly through a consultation process.
  • Boards and senior management should be particularly mindful of the Product Oversight & Governance framework introduced by EIOPA.

Differential Pricing

  • Following the published CBI Regulations, the CBI is expecting firms to be working hard to put in place relevant changes to their pricing practices by 1 July 2022.

Transparency in the functioning of the insurance market

  • This remains a key area of focus for the CBI, with the Governor noting the introduction of the National Claims Information Database as step-change in improving transparency and providing information on developments within the market.

Longer Term Trends

Although he did not develop these longer terms trends, the Governor noted the following:

  • direct and indirect impact of technological innovation and the digitalisation of financial services
  • our ageing society
  • the greater integration of Europe’s Single Market
  • the growing role of Asia in the global economy
  • the impact of mankind on the world’s biodiversity.

These trends will undoubtedly be expanded on in later speeches by the Governor. 

Contact Us

If you wish to discuss any of the above topics, please get in touch with your usual William Fry contact or any member of the Insurance team.

You can access the full transcript of Governor Makhlouf’s speech here.


Contributed by Joan McCarthy