On 16 February 2016, the Central Bank of Ireland published an updated paper setting out how it is implementing risk-based regulation, called PRISM Explained. It explains the PRISM framework and how the Central Bank engages with all regulated firms on this issue.
Although the paper is not specific to supervised firms in the insurance sector, it provides a useful insight into certain aspects of the “re-designed” PRISM model which impacts on (re)insurers from the beginning of 2016 in line with Solvency II implementation. The paper explains that from 1 January 2016, the Central Bank has introduced a separate set of “Probability Risk Categories” specific to the insurance sector. Reflecting Solvency II requirements, these insurance-specific risk categories are:
- Counterparty Risk
- Investment Risk
- Pricing and Underwriting Risk
- Claims and Reserving Risk
Furthermore, the existing ratings of Low to High have been replaced by “Risk Scores” of 1 – 4 (Low to High).
Appendix A to the paper contains a useful overview of what PRISM means for your firm depending on its categorisation. Appendix B also explains some of engagement tasks which will be a feature of the Central Bank’s supervisory engagement going forward.
To view the Central Bank paper in full, please click here.
Contributed by Eoin Caulfield
