The Central Bank of Ireland (Central Bank) has published Consultation Paper 172: Consultation on Industry Funding Levy Proposals (CP172), proposing significant changes to the calculation and allocation of the annual Industry Funding Levy (Levy) across several financial services sectors.

Most notably, the Central Bank proposes replacing the existing PRISM Impact-based methodology for (re)insurers, investment firms and investment fund service providers with metrics-based ad valorem methodologies. These proposals form part of a broader review of the Central Bank’s industry funding framework and are intended to enhance transparency, predictability and proportionality in the allocation of levy costs.

There will be no change in approach for intermediaries (including (re)insurance intermediaries) as the Central Bank already applies an ad valorem methodology to calculate their Levy.

This briefing summarises the key proposals in CP172 and considers their potential implications for (re)insurers.

Central Bank Industry Funding Levy

The Levy funds a substantial proportion of the Central Bank’s regulatory and supervisory activities. It is imposed annually in arrears, based on regulatory costs incurred in the preceding year. In 2025, approximately 87% of the Central Bank’s regulatory costs were recovered through the Levy, amounting to €226.1 million.

The current Levy framework uses three calculation methodologies:

• PRISM Impact-Based Scales: Levy amounts are determined by a firm’s PRISM Impact categorisation. This methodology currently applies to (re)insurers, investment firms and investment fund service providers and accounted for 44% of 2025 Levy income.
• Ad-Valorem Calculations: Levy amounts are calculated with reference to firm-specific metrics, such as assets, income, transaction volumes, or the number of funds. This methodology currently applies across a number of sectors, including intermediaries, credit institutions, investment funds, and payment and e-money institutions, and accounted for 54% of the 2025 Levy.
• Flat Rates: A fixed levy amount applying to all firms within a given category. This accounts for 2% of the 2025 Levy income.

Objectives and Scope

CP172 follows a broader Central Bank review of the industry funding framework, including engagement with industry stakeholders and consideration of approaches adopted in other jurisdictions.

The proposals are intended to improve transparency, predictability and proportionality in the allocation of Levy costs, while reflecting developments in the financial services sector and the Central Bank’s evolving supervisory approach. Importantly, they concern how costs are distributed among firms within particular sectors, rather than the total amount recovered from each sector.

CP172 seeks views from industry participants on the proposed changes to the methodology before finalisation and implementation.

Proposed Methodology Changes

CP172 proposes replacing the PRISM Impact-based scales with ad valorem methodologies for:

• Category B: (Re)Insurers;
• Category D: Investment Firms; and
• Category E2: Investment Fund Service Providers.

The Central Bank also proposes moving Category M, comprising Retail Credit Firms and Credit Servicing Firms, from a flat-rate to an ad valorem methodology. Additional metrics are proposed for Category N, comprising Payment Institutions and E-Money Institutions.

The Central Bank identifies five rationales for the proposed changes:

• Increased consistency across categories: If implemented, approximately 98% of the Levy income would be generated using an ad valorem approach.
• Reduction in PRISM-related “cliff edge” effects: Significant differences between PRISM Impact categories can lead to substantial changes in Levy liabilities when a firm moves between categories. Under an ad valorem methodology, changes should be more proportionate.
• More proportionate contributions: Levy liabilities would be calculated using sector-specific measures of firm scale and activity. Larger firms, measured by the applicable metrics, would therefore bear a greater share of the Levy.
• More transparency and predictability: Predefined metrics and forward guidance on expected regulatory costs should help firms forecast their Levy liabilities.
• Alignment with the Central Bank’s evolving supervisory approach: As the Central Bank has outlined in its updated “Our Approach to Supervision” documents (as previously covered by William Fry here), PRISM Impact ratings are no longer the primary driver of supervisory intensity. Ad valorem methodologies focusing on firm scale and activity are better aligned with this current supervisory approach.

To mitigate the potential financial impact of the proposed changes to the methodology on affected firms, the Central Bank proposes a phased implementation timeline between 2027 – 2030.

(Re)Insurance Sector Proposals

If implemented, the proposals set out in CP172 would see (re)insurers transition from a PRISM Impact-based methodology to an ad valorem calculation.

Under this framework, (re)insurers authorised in Ireland would be allocated to one of four sub-categories for calculation purposes:

• Captive and non-captive insurers classified as Small and Non-Complex Undertakings (SNCUs);
• Life insurance undertakings (including third-country branches);
• Non-life insurance undertakings (including third-country branches); or
• Reinsurance undertakings (including third-country branches).

The amount of Levy payable by firms within each sub-category will reflect the proportion of financial regulatory resources allocated to that sub-category. Under the proposed model, the following changes would apply:

• Captives and SNCUs: a flat Levy rate of €31,626 would apply. The SNCU regime is due to take effect in 2027. Until then, the proposed flat-rate treatment would apply only to captives.
• Life, Non-Life and Reinsurance Undertakings: The Levy would comprise a minimum amount and a variable amount. The variable amount would be calculated equally by reference to a firm’s gross written premium (GWP) or technical provisions (TPs).

Where total non-linked TPs are negative, they would be treated as zero. A 35% factor would apply to unit-linked GWP and unit-linked TPs. Variable amounts would be calculated using rates per million of GWP and TPs within specified bands.

The applicable rates, bands and thresholds would be recalculated annually by reference to:

• the amount to be recovered from each insurance sub-category; and
• the aggregate GWP and TP data reported by firms within that sub-category.

These proposals could result in a significant redistribution of Levy liabilities among (re)insurers, with GWP and TPs becoming increasingly important in determining the amount payable. However, the precise impact on individual firms will remain uncertain until the applicable rates, sub-category costs and aggregate industry data are available.

Methodology changes are not proposed for SPRVs (categories B2, B3, B5a, B5b, B6 and B9) or for (re)insurers authorised in another EEA Member State.

Other Industry Funding-Related Proposals

CP172 also addresses several other funding-related matters of broader relevance across the financial services sector:

• Treatment of fines: Enforcement fines will continue to be remitted to the Exchequer.
• Transaction fees and authorisation fees: The Central Bank is considering greater use of transaction fees and new authorisation and application-linked fees.
• EEA-authorised firms: The Central Bank is reviewing the treatment of firms operating in Ireland under the freedom to provide services or freedom of establishment. This includes considering whether ad valorem methodologies should replace the current flat-rate approach to reflect more accurately the supervisory costs associated with these firms.
• Annual Levy process: Proposed enhancements include advance guidance on prior-year and expected current-year regulatory costs, publication of prior-year aggregate industry metrics and issuance of Levy invoices in early summer.

Next Steps and Timelines

The consultation is open until 8 January 2027. The Central Bank invites feedback on the proposed methodologies, associated Levy metrics and implementation arrangements. Following the consultation, it is expected to publish a Feedback Statement and confirm its final approach.

For affected sectors, CP172 marks a significant move away from PRISM Impact-based scales and towards greater consistency in Levy calculations across the financial services sector.

Affected firms should assess the potential impact of the proposals on their future levy liabilities and consider engaging with the consultation process before it closes on 8 January 2027.

If you want to discuss the potential impact of these changes, please contact Ian Murray, Eoin Caulfield, Niall Campbell or any member of the Insurance Department.

Contributed by: Ellis Witcher