Is Ireland Moving Solvency II Compliance Forward?

The Central Bank of Ireland on 16th August 2011 published new rules on the governance of captives which appears to bring forward the timeline on compliance with some of the elements of the Solvency II Directive. The new rules outline the evaluation requirements and review of the Board of Directors, including their role and duties. Specifically, the rules include:

• The Board must consist of at least three Directors
• There must be at least two Board meetings per year
• Demands and duties of Board membership to be assessed and limits on the number of directorships which Directors may hold to be set to
  ensure they can comply with the expected demands of Board membership of a captive or any other institution.
• Board membership must be reviewed at least every three years
• A requirement for an annual confirmation of compliance to be submitted to the Central Bank
• Captives shall have a robust system of governance and operational processes which promote effective risk management and which are reviewed on a regular basis
• The Board is required to set and document the risk appetite for the institution and ensure it is monitored for adherence on an ongoing basis; subject to annual review by the Board. The appetite must include qualitative terms and quantitative metrics to ensure that it is in line with the agreed strategy.

In particular, the last two points seem to emanate from the Solvency II Directive where the Central Bank of Ireland (CBI) appears to be moving Solvency II compliance forward for Irish domiciled companies. The rules are applicable to all captives domiciled in Ireland and came into force on 1st September 2011. There is a nine month compliance period to make changes to systems, structures and processes in order to ensure compliance by 31st May 2012. Many captives will have no issue in meeting the quantitative risk appetite metrics by 31st May 2012, however, others may find it challenging. We discuss this in more detail in the next article.