On 17 November 2023, the Central Bank of Ireland (CBI) published its latest edition of the Intermediary Times newsletter (Newsletter).
The Newsletter highlights specific areas of interest to Irish retail intermediary firms and notably, what the CBI regards as the potential risks to a firm’s business.
The Newsletter contains important updates on a range of regulatory developments and topics impacting the intermediary sector. In particular, the CBI highlights several areas that warrant close attention by firms. In this article, we have highlighted three key takeaways from the Newsletter.
1. Corporate Governance
The CBI expects firms to continually assess their governance arrangements to ensure that they remain appropriate to the firm. Such assessments must consider the firm’s nature, scale and complexity and any changes the firm has undergone (e.g. growth). At a minimum, the CBI expects firms to include corporate governance as a standing agenda item for board meetings and to address issues that arise without undue delay.
Firms are expected to ensure that the number of directors on their board is commensurate with the firm’s nature, scale and complexity: they must ensure that an appropriate balance between executive and non-executive directors is struck, whether independent directors are required, and whether any other PCF roles are necessary.
During the CBI’s authorisation and supervisory work, it has observed an increase in firms where governance frameworks are not aligned with their business growth. The CBI reminds firms that failure to maintain appropriate governance structures may be grounds under sectoral legislation for revoking a firm’s authorisation. All firms would be well advised to ensure that due consideration of this topic is tabled for discussion at their next board meeting and to heed the CBI’s expectation that it remains a standing item going forward.
2. Client Premium Accounts (CPAs)
The importance of insurance intermediaries ensuring strict compliance with CPA obligations is (again) emphasised. Insurance intermediaries must have robust procedures and oversight arrangements to ensure that all CPA transactions are compliant with Section 3.50 of the Consumer Protection Code 2012 (CPC). Specifically, the CBI highlights that payments relating to industry levies, membership fees or other transactions which are not specified under Section 3.50 of the CPC are not permitted to be made from a CPA.
The CBI expressly refers to several other CPA-related CPC obligations:
- CPAs must be clearly designated ‘Client Premium Account’ to ensure client premiums are segregated from other monies.
- A separate CPA must be maintained for both life and non-life insurance business.
- A CPA must never be overdrawn.
- Monthly reconciliations of amounts due to regulated entities must be carried out and retained.
- Rebates due to consumers should be processed correctly and promptly.
The CBI reminds firms that failure to comply with CPC obligations may result in regulatory action being taken against them.
3. Regulatory Disclosure Requirements
The CBI reminds firms of the importance of ensuring continued compliance with the CPC’s regulatory disclosure requirements. The CBI draws particular attention to the specified form of regulatory disclosure statement set out under the CPC, and the circumstances in which it should be used. Various CPC obligations relating to remuneration disclosure and terms of business disclosure requirements are also highlighted by the CBI.
In addition to the three key takeaways explored here, other topics of interest in the Newsletter include CBI initiatives to assist new applicants for authorisation, a brief update on the CBI’s ongoing thematic inspection relating to consumer protection requirements, the CBI’s expectations for firms affected by the EIOPA Supervisory Statement on the use of governance arrangements in Third Countries, the upcoming public consultation on updating the CPC (opening in early 2024) as well as the CBI’s perspective on the critical necessity for firms to have robust cybersecurity measures in place.
To view the Newsletter in full, please click here.
If you have any questions on any item covered in the Newsletter, please contact any member of the Insurance Team or your usual William Fry contact.
Contributed by Jack Stoke & Catherine Carrigy