CP92 and what it means for the Irish insurance industry

Published by Cherry Chan on

The Central Bank of Ireland (CBI) have published a consultation paper which sets out specific domestic (Irish) requirements regarding the actuarial function and related governance arrangements for all insurance and reinsurance undertakings subject to Solvency II. All feedback should be submitted to the CBI by 29 May 2015.

The key requirements are outlined below:

Category Requirements
Head of Actuarial Function (HoAF)
  • Appointment of the HoAF will require pre-approval and should be appointed via the Central Bank Fitness & Probity regime
  • HoAF will replace the Pre-approved Function positions of Chief Actuary and Signing Actuary from 1 January 2016
Actuarial Opinion (AO)/Actuarial Report (AR) on Technical Provisions (TPs)

AO TPs:

  • HoAF shall provide an opinion on the compliance of TPs under relevant Solvency II requirements
  • In addition to current guidelines the AO TPs shall include any material limitations or reliance’s made providing the opinion on TPs and any recommendations to address any deficiencies

AR TPs:

  • An annual report provided by the HoAF to the Board which addresses TPs as reported In the annual regular supervisory report (RSR) with all the Solvency II requirements on or after 30 June 2016
  • Further to current guidelines the AR TPs shall be presented to the Board within 2 months of submission to the Central Bank and retained for 6 years  
  • The Actuarial Opinion needs to include the range or risks and adequacy of the scenarios considered as part of the ORSA process
Reserving Committee/Policy
  • Relevant for at least high impact undertakings
  • As under current requirements the Board is responsible for overseeing governance of setting TPs and its compliance with the reserving policy as well as documenting any changes in claims handling to the actuarial function and opining on savings in changes in practice rather than an acceleration of the time taken to settle claims, if relevant
  • Reserving policy is similar to current guidelines as it outlines the undertaking’s approach to calculating TPs and the related objectives and gives an overview of the reserving process including key roles, responsibilities and controls within the process 
Peer Review/Report

The following is similar to current guidelines:

  • Reviewing Actuary (RA), who cannot be an employee of the undertaking, to perform a peer review of TPS and associated AO TPs and AR TPs
  • Frequency of peer review:
    • High impact undertaking – every 2 years
    • Medium high impact undertaking – every 3 years
    • Medium low impact undertaking – every 5 years
  • RA must also look at the following for High and medium high impact undertakings:
    • Review all lines of business which have a significant impact on TPs
    • Assess both material sensitivities of results and material uncertainties in TPs as well as the appropriateness of the use of expert judgement used in calculating TPs
  • The Peer Review Report should contain at least the scope of the review, commentary on assumptions, methodologies and main uncertainties in calculation of TPs and an assessment of the reasonableness of the HoAFs conclusions within the AO TPs and AR TPs

You can read the full consultation paper on the Central Bank's website 

Feedback is due by 29 May 2015 and should be preferably sent by email to solvencyii@centralbank.ie


Key takeaways

  • the role of the Chief Actuary and Signing Actuary will cease from 1 January 2016 and be replaced by the HoAF
  • a peer review will be required for all medium low and higher impact undertakings

Most of the proposed requirements are based on the current and the Solvency II requirements.  However, some of the wordings used in the CP are stronger than the current requirements.  Our thoughts are having requirements that help strengthen the governance and adequacy of TPs are welcome.  However, there is a question whether the costs will outweigh the benefits for Low Impact Solvency II undertakings.