Risk Advisory

CBI's Regulatory and Supervisory Priorities 2024: Spotlight on (Re)Insurance

Nuala Crimmins
insight featured image

The CBI has released its 2024/2025 Regulatory & Supervisory Outlook which sets out key trends, risk drivers and outlooks shaping the (re)insurance sector. 

Supervisory priorities

The below supervisory priorities are reflective of the outcomes the CBI seeks to meet its statutory mandate and its local and international responsibilities in this ever-evolving and complex sector.

  • Priority 1: Proactive and consumer-centric leadership of firms;
  • Priority 2: Firms are resilient;
  • Priority 3: Firms address operating framework deficiencies;
  • Priority 4: Firms manage change effectively;
  • Priority 5: Climate change and net zero transition are addressed;
  • Priority 6: The Central Bank enhances how it regulates and supervises.

Key risks to the (re)insurance sector

The CBI has identified and prioritised the following key risks that the (re)insurance sector is facing:

Topic CBI's decription of risk and risk drivers Outlook

Financial risk and resilience

  • Pricing discipline and reserving strength.
  • Macroeconomic conditions and financial market

Climate change  and other environmental- related risks 

  • The transition to Net Zero.
  • The increasing frequency and severity of extreme weather events.
  • The increasing prevalence of environmental-driven litigation.

Consumer detriment risks

  • Inherent complexity of some non-life insurance products and their contingent nature.
  • Outcomes from long-term savings products depend on unknown future investment returns with the impact of charges not always being clear.
  • Operational constraints within firms impacting standards of customer service.

Cyber risks

  • Cyber incidents are becoming more sophisticated, and their costs are difficult to quantify.
  • (Re)insurers' own infrastructure vulnerabilities and the effectiveness of their IT risk management frameworks.

Operational risks and resilience

  • Access being sought to specialist services and to reduce fixed costs.
  • Intra-group outsourcing to achieve operational and financial synergies.

A robust and effective financial regulation legal framework is necessary for the safeguarding of the financial system and the protection of consumers and investors.

Key legal and regulatory topics being developed

EU level

  • DORA addresses digital operational risk in the financial sector and MiCAR introduces a new regulatory framework for European crypto assets.
  • The EU AI Act will apply to many sectors, including the financial services sector.
  • The European Single Access Point (ESAP) aims to provide a single point of access to public financial and non-financial information to give companies more visibility towards investors.
  • A new Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) legislative package will transform the existing AML Framework.
  • The changes for insurers emerging from the Solvency II review are now taking shape.

Domestic level

  • New Individual Accountability Framework (IAF).
  • A revised and modernised Consumer Protection Code.

Key supervisory activities for (re)insurers in 2024/2025

  • Review of reserving assumptions in light of higher inflation and interest rate scenario;
  • Review of governance and underwriting in sectors or lines of business which have been subject to significant growth or changes in risk profile;
  • A focus on integration of climate change and sustainability considerations by (re)insurers and, in particular, firms’ assessment of the materiality of their climate risk exposures, as set out in the climate guidance issued by the Central Bank in 2023;
  • Research the flood insurance protection gap with the aim of assessing the materiality of the gap in Ireland currently and how this might change over the medium to long term with the impact of climate change;
  • Review of the adequacy of governance arrangements where a branch in a third country is used to conduct regulated functions or activities;
  • Review of the oversight of critical outsourcing relationships and maturity of operational resilience frameworks;
  • Examine the impact of reinsurance market contraction on insurance business models;
  • Commence a series of targeted reviews focusing on, for example, firms’ consumer protection risk management frameworks, health insurance renewal process, and customer service;
  • Continued involvement in the European Insurance and Occupational Pensions Authority’s work on value for money in unit linked investment products;
  • Deepen the understanding of innovation and digitalisation in the insurance sector, in line with a broader evolution in the Central Bank’s approach to engagement on innovation; and
  • Ongoing risk-based supervision to include:
    • focus on underwriting and reserving practices;
    • operational resilience;
    • sustained improvement in culture; and
    • a holistic approach to risk management.