Regulation and Compliance of Financial Services – Insurance Feb 2022

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Central Bank issues final guide on the use of service companies in the insurance sector

On January 31, 2022, the Central Bank of Ireland (CBI) published its finalized guidance on the use of service companies for staffing purposes in the insurance sector (the guide). The guidance applies to all Irish (re)insurance companies that have entered or are planning to enter into hybrid or staffing arrangements with separate legal entities.

The guidance substantially mirrors the draft guidance issued by the CBI in August 2021. However, the CBI has modified its guidance related to resolvability. The CBI explained in the comment statement accompanying the guidance (the statement) that this was to clarify that their recommendation that they commit to capping six months’ working capital within the service company was just an example, and not a strict requirement.

The statement also clarifies a number of questions raised by stakeholders during the consultation period. For example, it confirms that the due diligence requirements under the guidance only apply to prospective deals, but that companies should review existing deals to ensure they are expanded and updated to align with the guidance.

The CBI expects the guidance to be implemented by January 31, 2023.

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