knowledge 7 July 2016 |

Ireland as a Location for Insurance Undertakings

Ireland is widely recognised as one of the best locations to establish European headquarters operations, due to:

• a favourable regulatory environment, including the ability of an Irish authorised insurer to passport to other European Economic Area (“EEA”) member states on a services or crossborder establishment basis;
• an advantageous tax regime, due to a combination of a 12.5% corporation tax rate and an exceptionally extensive and comprehensive set of double tax agreements; and
• access to a sophisticated financial services ecosystem with a deep pool of staff, managers, professional advisers, regulators and service providers, including not only native English speakers but a sizeable international population (roughly 17%).

In recent years, a growing number of major international insurance undertakings have established significant “hub” operations in Ireland, centralising their organisational structure in a single head office located in Ireland, with “spoke” operations in other EEA member states.

Regulatory Framework

By and large, insurance in Ireland is regulated under the Solvency II Directive which has been fully implemented in Ireland without any significant national additions. The Central Bank of Ireland (“CBI”) is responsible for the authorisation, prudential regulation and supervision of (re)insurance undertakings authorise in Ireland. The CBI complies with the European Insurance and Occupational Pensions Authority’s Guidelines on the supervision of branches of third-country insurance undertakings (available here).

Passporting and Third Country Firms

(Re)insurance undertakings authorised in Ireland can passport to other EEA  member states on either a services or cross-border establishment basis, subject to the fulfilment of certain notification requirements. The CBI has published Guidelines for the establishment of an EEA Branch (available here).

Generally, a (re)insurance undertaking needs to be authorised in an EEA member state in order to carry on the business of insurance in Ireland. A non-EEA authorised insurance undertaking must establish an Irish authorised branch in order to carry on business in Ireland or acquire an existing Irish authorised (re)insurance undertaking.

If a non-EEA member state (“a Third Country”) has a supervisory regime which is considered to ensure a similar level of policyholder and beneficiary protection as Solvency II, that Third Country will be treated in many respects as if it were an EEA member state. While this does not permit an undertaking established in that Third Country to passport into the EEA, it does deal with the treatment of reinsurance, recognition of group treatment, financial reporting and sharing of information between regulators.

Authorisation Process

An application for authorisation must be made to the CBI. The application process involves a number of stages, namely:

• a review of the authorisation requirements and a preliminary meeting with the CBI to discuss the application;
• the submission of the information required in the relevant CBI check list (available here) together with the completed application form; and
• a review of the application by the CBI: this review commences once the CBI has received a completed application.

Following the receipt of a completed application, the CBI expects to complete the authorisation process in three months, but applications can take up to six months, depending on the quality and complexity of the application, and the manner in which the applicant addresses any queries made. Further information on the authorisation process is available in the CBI’s Guidelines on Completing and Submitting Life Insurance, Non-Life Insurance and Reinsurance Applications (available here).

An entity, including a Third Country (Re) Insurance Undertaking, that intends to acquire an existing Irish authorised (re)insurance undertaking will have to notify, and obtain approval from the CBI by completing an Acquiring Transaction Notification Form (available here). The approval process takes approximately two months, although this period may be interrupted if additional information or clarification is sought from the applicant.

Key Considerations

An undertaking that wishes to carry on an insurance business under Irish law must fulfil a number of requirements. For existing groups with substantial operations outside of Ireland, an important requirement will be the CBI’s emphasis on ensuring that the applicant’s “heart and mind” will be located in Ireland. This essentially means that the CBI will need to be satisfied that the applicant will be properly run in Ireland and that the CBI will be able to supervise it effectively. Among other things, the CBI will expect to see present in Ireland:

• a senior management team with strength and depth overseen and directed by a strong board; and 
• organisation structure and reporting lines which ensure there is appropriate separation and oversight of all activities.  

There is no requirement for any specific individual to be resident in Ireland. However, ideally, all of the personnel who are to fulfil the applicant’s core functions should operate out of, and be resident in, Ireland.

An Irish authorised insurance undertaking may outsource/delegate some of its activities to entities in other jurisdictions, subject to compliance with the Solvency II Regulations. Among other things a (re)insurance undertaking will need to notify the CBI before outsourcing critical or important functions or activities and regarding subsequent material developments with respect to those functions or activities. The CBI has published a paper, Notification Process for (Re)Insurance Undertakings when Outsourcing Critical or Important Functions or Activities under Solvency II, which is available here.

How Can McCann FitzGerald help? McCann FitzGerald is one of Ireland’s premier law firms and advises on the full range of insurance activities undertaken in Ireland. We have substantial experience in successfully guiding applicants through the insurance application process and in helping them comply with their legal obligations, once established. If you are considering setting up an insurance undertaking authorised under Irish legislation, please contact us for further information as to how we can help.