S.I. 731 of 2004

European Communities (Supplementary Supervision of Insurance Undertakings in an Insurance Group) (Amendment) Regulations 2004

I, Brian Cowen, Minister for Finance, in exercise of the powers conferred on me by the European Communities Act 1972 (No. 27 of 1972), as amended by the European Communities (Amendment) Act 1993 (No. 25 of 1993), and for the purpose of giving effect to Directive 2002/87/EC, dated 16 December 2002, of the European Parliament and of the Council, hereby make the following Regulations:

Citation and commencement

1.       (1)   These Regulations may be cited as the European Communities (Supplementary Supervision of Insurance Undertakings in Insurance Group) (Amendment) Regulations 2004.

(2)   These Regulations come into operation on 1 January 2005.

Interpretation

2.       In these Regulations, “Principal Regulations” means the European Communities (Supplementary Supervision of Insurance Undertakings in an Insurance Group) Regulations 1999 (S.I. No. 399/1999).

Amendment of Regulation 2 of the Principal Regulations (Interpretation)

3.       Regulation 2(1) of the Principal Regulations is amended as follows:

(a)    by inserting the following definition before the definition of “authorised officer”:

“‘asset management company’ means--

(a)    a management company within the meaning of Article 1a (2) of Council Directive 85/611/EEC on the co-ordination of laws, regulations and administrative provisions relating to UCITS, or

(b)    an undertaking the registered office of which is not located within a Member State but which would require authorisation in accordance with Article 5(1) of that Directive if it had its registered office within such a State;”;

(b)    by inserting the following definition after the definition of “financial year”:

“‘group’ means--

(a)    a group that comprises a parent undertaking and subsidiary undertakings of the undertaking and any entities in which the parent undertaking or any of its subsidiary undertakings participate, or

(b)    a group of undertakings linked to each other by a relationship as defined by Article 12(1) of Directive 83/349/EEC;”;

(c)    by inserting the following definition after the definition of “financial year”:

“‘Insurance Acts’ means the Insurance Acts 1909 to 2002, as amended from time to time, and includes any later Act that is required to be read as one with those or any of those Acts;”:

(d)    by substituting the following definition for the definition of “insurance holding company”:

“‘insurance holding company’ means a parent undertaking (not being a mixed financial holding company) whose main business is to acquire and hold participations in one or more subsidiary undertakings, where--

(a)    if there is only one subsidiary undertaking, it is an insurance undertaking, or

(b)    if there are two or more subsidiary undertakings--

(i)     they exclusively or mainly consist of insurance undertakings, reinsurance undertakings, asset management companies or non-member-country insurance undertakings, and

(ii)    at least one of them is an insurance undertaking;”;

(e)    by inserting the following definition after the definition of “insurance holding company”:

“‘insurance sector legislation” means all or any of the following:

(a)    the Insurance Acts;

(b)    the Life Regulations of 1994;

(c)    the Non-Life Regulations of 1994;

(d)    the Regulations of 1976;

(e)    the Regulations of 1996;

(f)     the European Communities (Life Assurance) Regulations 1984 (S.I. No. 57/1984);

(g)    these Regulations;”;

(f)    by substituting the following definition for the definition of “mixed-activity insurance holding company”:

“‘mixed-activity insurance holding company’ means a parent undertaking (other than an insurance undertaking, a mixed financial holding company, a non-member-country insurance undertaking, a reinsurance undertaking, asset management company or an insurance holding company) that includes at least one insurance undertaking among its subsidiary undertakings;”;

(g)    by inserting the following definition before the definition of “Non-Life Regulations of 1994”:

“‘mixed financial holding company’ has the meaning given by Regulation 3 of the European Communities (Financial Conglomerates) Regulations 2004 ( S.I. No. 727 of 2004 );”;

(h)    by substituting the following definition for the definition of “participating undertaking”:

“‘participating undertaking” means an undertaking that is--

(a)    a parent undertaking or other undertaking that holds a participation, or

(b)    an undertaking that is linked to another undertaking by means of a relationship as defined by Article 12(1) of Directive 83/349/EEC;”;

(i)     by substituting the following definition for the definition of “related undertaking”:

“‘related undertaking” means--

(a)    a subsidiary or other undertaking in which a participation is held, or

(b)    an undertaking that is linked to another undertaking by means of a relationship as defined by Article 12(1) of Directive 83/349/EEC;”.

Amendment of Regulation 3 of the Principal Regulations (Application)

4.       Regulation 3 of the Principal Regulations is amended by inserting “, asset management company” after “reinsurance undertaking”, wherever appearing.

Amendment of Regulation 4 of the Principal Regulations (Scope of supplementary supervision)

5.       Regulation 4 of the Principal Regulations is amended--

(a)    in paragraph (1), by inserting “, asset management company” after “reinsurance undertaking”, and

(b)    by inserting the following paragraph after paragraph (3):

“(4) If an asset management company is part of a group that is subject to these Regulations, the rules that apply to and in respect of reinsurance undertakings because of the relevant insurance sector legislation also apply, with necessary modifications, to and in respect of the asset management company.”.

Amendment of Regulation 5 of the Principal Regulations (Competent authority for exercising supplementary supervision)

6.       Regulation 5 of the Principal Regulations is amended by inserting “, asset management company” after “reinsurance undertaking”.

Amendment of Regulation 7 of the Principal Regulations (Access to information)

7.       Regulation 7 of the Principal Regulations is amended by inserting the following sentence at the end of paragraph (6)(a):

“If the competent authority making the request does not itself carry out the verification, it may nevertheless participate in the verification.”.

Amendment of Regulation 9 of the Principal Regulations (Intra group transactions)

8.       Regulation 9 of the Principal Regulations is amended by inserting the following paragraph after paragraph (2):

“(2A) An insurance undertaking that is the holder of an authorisation issued by the Bank shall establish and maintain adequate risk management processes and internal control mechanisms for the purpose of identifying, measuring, monitoring and controlling transactions to which this Regulation applies. Those processes and mechanisms must include sound reporting and accounting procedures.

(2B) The Bank is responsible for supervising compliance with the requirements of paragraph (2A).”.

Amendment of Regulation 11 of the Principal Regulations (Reinsurance undertakings, asset management companies, insurance holding companies and non-member-country insurance undertakings)

9.       Regulation 11 of the Principal Regulations is amended in paragraph (2) by inserting “, asset management company” after “reinsurance undertaking”.

Insertion into of the Principal Regulations of new Regulations 11A and 11B

10.     The Principal Regulations are amended by inserting the following Regulations after Regulation 11:

“Qualifications, reputation and experience of persons concerned in the direction or management of insurance holding companies

11A. (1) This Regulation applies only to an insurance holding company that has its head office in the State.

 (2) An insurance holding company is required to take all reasonably practicable steps to ensure that the persons who are concerned in the direction or management of the company--

(a)    are suitably qualified, and

(b)    are of sufficiently good repute, and

(c)    have sufficient experience,

to be able to perform their duties in that capacity.

 (3) The Bank may, by notice in writing, direct an insurance holding company to provide it with such information as it requires concerning the qualifications, reputation and experience--

(a)    of all persons who are concerned in the direction or management of the company, or

(b)    of such of those persons as are specified in the notice.

 (4) If it appears to the Bank that a person referred to in subparagraph (3)--

(a)    is not suitably qualified, or

(b)    is not of good reputation, or

(c)    does not have sufficient experience to hold the position,

it may, by notice in writing, direct the company to take such action (including the removal or dismissal of the person from the position) as is specified in the notice.

 (5) An insurance holding company shall not appoint a person to a position by virtue of which the person will be concerned in the direction or management of the company unless it has previously notified the Bank of the proposal to make the appointment. An appointment made in contravention of this paragraph is void.

 (6) An insurance holding company shall provide the Bank with such information as it requires concerning the qualifications, reputation and experience of a person referred to in paragraph (5).

 (7) An insurance holding company to which a direction has been notified under this Regulation shall comply with the direction within the period specified in the notice.

 (8) An insurance holding company that--

(a)    contravenes paragraph (5), or

(b)    fails to comply with paragraph (6) or (7),

commits an offence.

 (9) A person who is found guilty of an offence under this Regulation is liable on summary conviction--

(a)    if a natural person, to a fine not exceeding €3,000 or to imprisonment for a term of not more than 12 months, or to both, or

(b)    if not a natural person, to a fine not exceeding €5,000.

 (10)     The Bank is not liable in damages for any loss of office arising directly or indirectly because the Bank has given a direction under paragraph (4).

 (11) The Bank may, by further notice in writing, vary or revoke a direction notified to an insurance holding company under this Regulation.

 (12) A direction, and a variation or revocation of the direction, notified under this Regulation takes effect from the date of the notice or, if a later date is specified in the notice, from that later date.

 (13)     A direction given by the Bank under this Regulation and a variation of the direction are appealable decisions for the purposes of Part VIIA of the Central Bank Act 1942 .

 (14)     For the purposes of this Regulation, a person is concerned in the direction or management of an insurance holding company if the person--

(a)    is a director of the company, or

(b)    not being a director of the company, has, in the opinion of the Bank, power to direct or control the affairs of the company, or

(c)    is the chief executive of the company, or

(d)    holds any other management position with the company of a kind publicly notified by the Bank.

Enforcement of Bank directions

11B. (1) If the Bank is of the opinion that an insurance holding company has not complied with a direction notified under Regulation 11A of these Regulations, it may apply to the High Court in a summary manner for an order under paragraph (4).

 (2) On making an application under paragraph (1), the Bank shall serve a copy of the application on the insurance holding company concerned. On being served with the copy, that company becomes the respondent to the application and as such is entitled to appear before and be heard at the hearing of the application.

 (3) Pending the hearing of the application, the High Court may make such interim or interlocutory orders as it considers appropriate

 (4) On the hearing of the application, the High Court may, if satisfied that the respondent has not complied with the direction, make an order requiring the respondent to comply.

 (5) If the High Court makes an order under paragraph (4), it may also make such ancillary orders as thinks appropriate in the circumstances.”.

Amendment of Annex I to the Principal Regulations

11. Annex I to the Principal Regulations is amended as follows:

(a)    in paragraph 2, by inserting the following subparagraph after subparagraph (4):

“(5)       In a case where capital links do not exist between two or more of the undertakings comprising an insurance group, the Bank shall determine a notional proportional share, which must be taken into account when calculating the adjusted solvency of an insurance undertaking in an insurance group.”;

(b)    in paragraph 9, by substituting the following sub-subparagraph for sub-subparagraph (b):

“(b)  if--

(i)     the undertaking is a related undertaking of an insurance holding company, an asset management company or a reinsurance undertaking, and

(ii)    the insurance holding company, asset management company or reinsurance undertaking has its registered office in the State, and

(iii)   the undertaking is taken into account when calculating the adjusted solvency of the insurance holding company, asset management company or reinsurance undertaking.”.

(c)    by inserting the following paragraph after paragraph 17:

“Related credit institutions, investment firms and financial institutions

17A.    When calculating the adjusted solvency of an insurance undertaking that is a participating undertaking in a credit institution, investment firm or financial institution, the following apply:

(a)    the rules prescribed by Article 16(1) of Directive 73/239/EEC and Article 27 of Directive 2002/83/EC relating to the deduction of participations;

(b)    the provisions of those Directives in so far as they authorise alternative methods to be used and allow participations not to be deducted.”.

Explanatory Note

These Regulations give effect to those provisions of Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council, which apply specifically to the supplementary supervision of insurance undertakings in an insurance group.