On 11 May 2010, the Financial Regulator issued a public consultation on Variable Annuities. Consultation Paper CP42 on Investment Guarantees – Guidance on Reserving and Risk Governance followed a discussion document on reserving for Variable Annuities (VAs) which was published in August 2009. Submissions received in response to the discussion paper outlined the difficulty in defining VAs and has led to the expansion of the scope of this Consultation Paper to cover all Investment Guarantees, except for certain and well defined classes.
The Consultation Paper proposes new standards for insurers who write VA business in Ireland. These are complex products which require high quality, well resourced risk management arrangements and the proposed regime creates a comprehensive regulatory framework for firms who wish to do this business.
Under the proposals companies who transact in this business must meet general requirements including:
- Submission of a Financial Risk Analysis annually with regulatory returns;
- Adherence to Minimum Capital and Reserves Standards;
- Follow the Risk Volume Capital Process; and
- Subject the Financial Risk Analysis and Risk Volume Capital to independent oversight.
Interested parties are asked to comment on the proposals by 30 June 2010.
