‘Insurance Industry facing new supervisory regime and shift of focus’, Director of Insurance Supervision, Sylvia Cronin

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• Insurance risk assessment to target underwriting, claims, pricing, reserving and risk management
• Governance, risk management and internal controls a key focus for low impact firms
• Intensity of supervision, targeted risk assessments to support company assertions
• ORSA process to capture the dynamism of the risk management framework and its firm-wide use

Speaking at Insurance Ireland's Milliman CRO Forum today, Director of Insurance Supervision, Sylvia Cronin, highlighted supervision and regulatory requirements for the insurance industry in 2016.

“The engagement intensity score will also be applied at the individual sub-risk category level as opposed to just at the level of the firm”, she said. “By way of an example, this might mean that where reserve risk is the issue giving cause for concern, then supervisory intervention is directed at that area, as opposed to looking at the other risks such as governance, in equal measure.”

Addressing firms designated as ‘low impact firms’, Ms Cronin said: “We have also developed a bespoke model for companies with a low impact rating. This reflects a move from reactive only supervision of low impact firms to a proportionate amount of pro-active supervision for those firms. Thematic reviews will be conducted on this category of firms by the on-site inspections team going forward and this model has already commenced roll-out in Q1 this year."

Speaking about the supervisory framework under Solvency II, Ms Cronin said: “I would recommend that each firm contact your dedicated supervision team about the specific engagement plan for your company in 2016.”

On the Insurance Directorate’s priorities for 2016, Ms Cronin noted that the focus for insurance supervision in 2016 will be on insurance risk, in the areas of pricing and reserving and how embedded risk management is in our regulated entities. The risk function is critical to success of business and plays a central role of challenge and oversight. On culture, Ms Cronin said: “Behaviour and culture are integral parts of the bigger organisational picture of a financial institution and in a Solvency II environment, risk culture is key.

“Everyone within a company has a role in ensuring that personnel live and breathe their articulated cultures. A sound risk culture should promote effective challenge in which decision-making processes promote a range of views, allow for testing of current practices, and stimulate a positive, critical attitude among employees and an environment of open and constructive engagement.”

Ms Cronin said that Boards should be involved in steering their firm’s ORSA process and not just signing off a final report. Where the report didn’t cover this point, a review of Board or Risk Committee minutes may demonstrate that Boards were heavily involved.
She also stressed that firms should be assessing all material risks, quantifiable and non-quantifiable, that they face, and either quantify them or set out a plan to handle them. A review of the Forward Looking Assessments received in 2015 has been carried out and general findings have been shared with firms.

“This is very positive and is exactly the purpose of the own risk assessment. Combined with the board point mentioned just now, there is clear evidence that some firms are well down the road of identifying and analysing all of the risks that their businesses face.”