The year just gone has been another busy one in terms of legal and regulatory developments affecting the Irish and cross-border insurance and reinsurance sectors. There is no let-up in this and, as well as initiatives at the European level, 2022 saw domestic legislation including the key groundwork on the Central Bank of Ireland’s proposed individual accountability framework.

Consumer Elements
In the Irish market, 2022 saw a continued focus on consumer enhancements. There were several pieces of legislation implemented or commenced. In June, the Insurance (Miscellaneous Provisions) Act 2022 was signed into law. The Act contains measures complementing the Central Bank of Ireland’s own initiatives on the prohibition of “price walking” in the renewal of policies. A ban on the practice for motor and home insurance became effective on 1 July 2022. The Act made other pro-consumer changes to the Consumer Insurance Contracts Act 2019.
The Central Bank emphasised its consumer protection intentions in signalling new measures it will implement to identify, mitigate, and manage risks to consumers. One measure is a three-stage review of the Consumer Protection Code 2012, the first stage of which commenced in October. The review will lead to a re-cast Code ensuring consumers are well-protected in the changing financial services landscape. The consultation on the review recognises the increasing influence of digitalisation and technology generally, including in the distribution of insurance.

On a similar theme, towards the end of the year the Government published its third implementation report on its Action Plan for Insurance Reform, indicating that 90% of the goals it set aimed at easing the cost and availability of insurance are close to being achieved. This included work in reforming the Personal Injuries Assessment Board and other facilitative changes.

Risks & Challenges
In December, the Central Bank published a synopsis of the key risks it identified during its risk assessment and scanning process of 2022. These will inform its supervisory priorities in the period ahead. Among the risks listed were:
• Macroeconomic and financial risks owing to uncertainty in economic outlook, inflation, and geopolitical events.
• Operational risks, particularly those due to an over reliance on outsourcing key activities to third parties and IT risks, such as data and/or financial loss arising from cyber-attacks and criminal data breaches.
• Challenges relating to digitalisation, in particular the increased use of AI and Big Data. These advances in technology pose prudential and consumer protection risks for insurers, however the incoming EU Artificial Intelligence Act and Digital Operational Resilience Act (so-called DORA) may ease some of these concerns.
• Climate change will continue to remain a long-term challenge for insurers, with particular risks being those related to the transition to a low carbon economy, as well as the physical effects of climate change and potential liability for compensation for connected losses.

Culture and Conduct Agenda
Published in July, the Central Bank (Individual Accountability Framework) Bill 2022 will increase potential personal exposures for directors and other officers within Irish-regulated financial entities. The Bill intends to improve accountability and trust in the financial sector by creating a framework that contributes to cultural and practical change. Once enacted, which is expected during 2023, it will mean significant adjustments for the sector and persons performing “controlled functions” and “pre-controlled functions”. Proposed measures include:
• The new Senior Accountability Executive Regime (SEAR);
• New conduct standards for firms and their management and staff;
• Enhancements to the Central Bank’s Fitness and Probity regime; and
• Stronger Central Bank enforcement capabilities.

In keeping with the theme of improving accountability and use of its enforcement capabilities, the Central Bank during 2022 again imposed material sanctions on entities in breach of regulatory requirements. While most headlines focused on sanctions imposed on AIB, Bank of Ireland and EBS affecting tracker mortgage customers, in insurance and related areas there were admonishments including in the areas of governance and internal control systems, conflicts of interest and the application of the F&P regime.

Sustainability
The Central Bank in August published its Consultation Paper on Guidance for (Re)insurance Undertakings on Climate Change Risk. In it, the Central Bank discussed the results of its thematic review, where thirty-nine (re)insurers were selected from the life, non-life and reinsurance sectors. The Central Bank observed a range of areas where, to greater or lesser degrees, climate change risk had been integrated into (re)insurer business planning and strategic thinking. Examples of good practices noted included introducing detailed consideration of climate change in the risk management process and the development of clear sustainability strategies. ESG and sustainability initiatives will remain a core focus at both national and European level into 2023 and the years ahead.

Transactional activity
While Irish M&A deal value slowed in 2022 when compared with 2021, it remained a busy year for transactional work focused especially on the domestic intermediary sector. In numbers of deals tracked, financial services transactions such as insurance brokerage buyouts accounted for almost a third of Irish M&A. The second half of 2022 saw a slowdown, due to factors including inflation, interest rate rises and geopolitical concerns such as the war in Ukraine. While the insurance sector followed these trends, the consolidation in the Irish intermediary market continued with smaller brokers acquired by groups such as PIB and Aston Lark (each now at or near double-digits in terms of numbers of acquisitions), as well as international entrants like the US group Gallagher.

The year saw Zurich Insurance announce a proposed move of its non-life European head office from Ireland to a BaFin-regulated entity operated instead from Germany. The impact of Brexit was cited as a reason for the decision. In 2021, a report by the Central Bank said that factors including high legal costs, settlement pay-outs and reinsurance may be reasons for insurers exiting the Irish market (whilst intended to be redressed through the new Action Plan for Insurance Reform measures). In 2022, Zavarovalnica Sava, a major Slovenian insurer, stopped writing business in Ireland after the Central Bank informed it that it was liable for business interruption claims stemming from the Covid-19 pandemic. The Central Bank’s approach to aspects of regulation, including the use of its enforcement powers and perhaps some uncertainty regarding SEAR and the other individual accountability measures, are also cited as potential reasons.